Not all news about an IRA is good news. Unfortunately Congress and the IRS have designed several methods to ruin your day. They have the audacity to impose penalties for certain actions individuals take with their retirement accounts. These penalties are more correctly called additional taxes. Does that make you feel better?
First, there is a penalty for putting too much money in your account. This one is called the Excess Contributions Tax.
Second, there is a penalty for leaving too much money in your retirement account. This puppy is called the Excess Accumulations Tax. This one costs only 50% of the required amount not taken by the deadline. This applies to both accountholders and beneficiaries.
Third, there is a penalty for investing in what the government views as unwise investments. Big Brother is looking out for you! This jewel is called the Prohibited Transactions Tax. If you break the rules in this area you no longer have an IRA. The value of the account in the year you do the dastardly deed is subject to income tax and if you are lucky enough to be under 59 1/2 you also get to pay an additional 10% penalty.
Fourth, if you take distributions before you reach the ripe old age of 59 1/2 you could be subject to the Tax on Early Distributions.
Begin your penalty adventure by clicking on one of the links below.
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