Question

Donald, age 38, has a qualified plan balance of $500,000. He made a little mistake in not filing Federal Income tax returns for the last 4 years. Donald is now willing to pay the tax levy of $85,000 from his qualified plan balance. The payment of the tax levy from the qualified plan balance is ordinary income and is subject to a 10% early withdrawal penalty. T/F? True False

Answer 1

Yes the Qualified PLan Balance is Ordinary Income Because it is save form the income earned in ordinary income and saved for the retirement and if the same is withdraws from that plan same is liable for the Penalty of 10% for early withdrawal penalty and if the same is withdraw with in two years of start then the penalty amount is 25 % of the withdrawal amopunt.

Therfore it is TRUE  payment of the tax levy from the qualified plan balance is ordinary income and is subject to a 10% early withdrawal penalty.