At tax time, age matters. Taxpayers under age 59½ who take distributions from their retirement plans must generally pay an added tax penalty, equal to 10% of the distribution. Exceptions exist, including the need to pay documented medical bills (subject to statutory limitations). When one taxpayer under age 59½ lost his job, he took a distribution to “tide himself over.” After the IRS applied the 10% penalty, he stated the funds were used to pay medical bills, though he presented no evidence. The amount he claimed also exceeded other statutory limitations for medical expense deductions. The U.S. Tax Court upheld the assessment of $3,765 in additional tax. (TC Memo 2022-29)
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