Early Retirement Distribution Leads to Additional TaxEarly Retirement Distribution Leads to Additional Tax
Unless a petitioner meets one of the exceptions, she’s liable to pay 10 percent more
In Fields v. Commissioner, T.C. Memo. 2014-48 (March 19, 2014), the Tax Court determined that a petitioner was liable for a 10 percent additional tax pursuant to Internal Revenue Code Section 72(t)(1), due to an early distribution from her qualified retirement plan. Here’s why.
The Distribution
Prior to 2010, Jennifer Lynn Fields worked for Wal-Mart and participated in its IRC Section 401(k) retirement plan. In 2010, she received a $7,383 distribution (which represented the full amount of her account balance under the plan) and liquidated the account. She asked that all required taxes be withheld from the distribution. As a result, 20 percent of the distribution ($1,477) was withheld, and she received a net distribution of $5,906. At...
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