| Excise Tax | |
 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. |
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 1. Excise taxes are considered an indirect form of taxation because the government does not directly apply the tax. An intermediary, either the producer or merchant, is charged and then must pay the tax to the government. These taxes can be categorized in two ways: - Ad Valorem - A fixed percentage is charged on a particular good. - Specific - A fixed dollar amount dependent upon the quantity purchased is charged. 2. Here are some examples of situations in which excises taxes are charged on transactions in retirement accounts: - A 6 % excise tax applies to excess IRA contributions that are not corrected by the applicable deadline. - A 10% excise tax applies to distributions from an IRA, qualified plan or 403(b) account, that occur before the participant reaches age 59.5. - A 50 % excise tax applies to required minimum distribution amounts not withdrawn by the applicable deadline (referred to as an excess-accumulation penalty). |
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 Retirement Plan Tax Forms You May Need to File - Part 1 - Read this if you've taken early distributions or owe excess-contribution or excess-accumulation penalties. Preparing for the RMD Season - Part 1 - Paying taxes is inevitable - that's why you need to learn about the rules for required minimum distributions. Avoiding IRS Penalties On Your IRA Assets - The best way to do this is to know what transactions can cause expensive consequences. Correcting Ineligible (Excess) IRA Contributions - Part 1 - Eager to save for retirement, we sometimes contribute more than the limits allow. Learn how to avoid penalties. |
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