Taxpayer Required to Pay Penalty for Early Retirement Distribution

The U.S. Tax Court held in Watson v. Commissioner that an individual was liable for a 10 percent penalty on retirement distributions because she retired prior to age 55. Ms. Watson argued that since she did not actually receive distributions until after age 55, she should not have to pay the penalty. The court ruled that she was still required to pay the additional 10 percent tax under section 72(t).

See Watson v. Commissioner, T.C. Summary Opinion 2011-113 (Sept. 28, 2011).

Posted by Adam Bair, Associate Editor, Wealth Strategies Journal