When cash is withdrawn off a pension membership, the fresh taxpayer can be responsible for tax on the detachment

If the taxpayer is less than 59 step 1 /1 years old, a 10 percent additional tax on early distributions may be assessed. However, the taxpayer is not liable for the 10 percent additional tax on early distributions if the money was withdrawn because of a notice of levy served on the retirement account. See IRC 72(t)(2)(A)(vii). There ount withdrawn.

Send Letter 3257, Excise Tax for Early Withdrawal Not Due if by Levy to Retirement Plan Administrator, with the notice of levy and Letter 3258, Excise Tax for Early Withdrawal Not Due if by Levy to Taxpayer, with the taxpayer’s copy of the notice of levy. These letters state the withdrawal is not subject to the 10 percent additional tax on early distributions, even if the taxpayer is under 59 1 /1 years old. These letters are available as templates on the Integrated Collection System.

The fresh new levy finance try at the mercy of 20 percent government tax withholding because of the payor of such money. Select IRC 3405(c). A levy only get to the levied fund you to will always be immediately after such as for instance withholding.

Example:

A notification regarding levy was supported on the an effective taxpayer’s licensed plan. Extent owed is $ten,one hundred thousand, while the taxpayer provides $5,100 from the plan. Continue reading