If you are a taxpayer, more than likely you are worried about whether or not you will receive a tax penalty once you file your tax return. Therefore, today we are discussing how you can know you are at risk for a major tax penalty.
You Did Not Take Out Distributions
The IRS will hit you with a large tax penalty if you fail to take distributions from your various retirement accounts when you turn 70 ½ or when you go into retirement, whichever occurs later. In the event that you do not do so, the IRS is taxing you at a 50% rate on all of the money that you should have withdrawn. Think of this as one of the largest tax penalties that you will ever encounter.
How Long Do You Have to Take These Distributions to Avoid Penalties
It is suggested that at the latest you do it the week before Christmas. This is because you cannot wait until the last day of the year since the markets close early and once Christmas Eve comes in there is going to be so much going on.
The major tax penalty that taxpayers will experience this tax season is the penalty they are hit with for not taking out distributions. Filing late and not paying estimated taxes are other penalties yet they have nothing on this one. Therefore, if it is time for you to take out your distributions make sure you do so soon.
We are a Bellevue CPA and Seattle CPA firm! Be sure to get in touch with us at (425) 483-6600 for a tax consultation!