Friday, October 5, 2012
At least, that's what the New York Society of Certified Public Accountants (NYSSCPA) would like to see. According to Accounting Today, the NYSSCPA "has asked Congress to consider new legislation that would temporarily waive tax penalties for taxpayers who are forced to make early withdrawals from retirement accounts due to financial hardship." The NYSSCPA noted that the tax penalty has become a problem for those who are relying on their qualified retirement plan to help them get through the economic crisis. Thus, the NYSSCPA has petitioned Congress to ask them to enact a number of short-term exceptions to the tax penalty. It is also important to note that the NYSSCPA only supports the waiver of the additional tax penalty. In other words, the distribution would still be considered ordinary income for federal income tax purposes. This are the following of exceptions that the NYSSCPA would like Congress to consider:
- "Payments to prevent foreclosure on a principal residence.
- Payments for a student loan of the taxpayer, their spouse or their child.
- Long-term unemployment (individuals who have exhausted their 26 week basic unemployment benefit on or before the due date, including extensions, of their tax return).
- To pay a federal, state or local tax lien.
- Extent to which a taxpayer is insolvent at the time of distribution (ignoring the amount of distribution).
- As part of a court-ordered bankruptcy payment plan.
- Deemed distribution of a loan under Section 72(p) of the Tax Code, if caused by involuntary loss of employment by layoff or termination."
See Michael Cohn, N.Y.CPAs Ask Congress to Waive Tax Penalties on Early Retirement Plan Withdrawals, Oct. 3, 2012.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this to my attention.