Common use of EXCESS ACCUMULATION PENALTY Clause in Contracts

EXCESS ACCUMULATION PENALTY. If you do not take the RMD, you may be subject to a 50% excess accumulation penalty tax on the amount not distributed as required. You must report the 50% excess accumulation penalty tax by filing a completed Form 5329 with the IRS along with your payment. For taxable years beginning after December 29, 2022, the amount of the excess accumulation penalty tax is reduced from 50% to 25%. The penalty is further reduced to 10% for IRA owners who take a corrective distribution and submit a modified federal income return within the applicable correction window. The correction window begins on the date the excess accumulation penalty is incurred and, generally, ends on the last day of the second tax year following year in which the penalty was incurred. For additional information regarding your RMD, consult your tax advisor and/or IRS Publication 590-B. Special Tax Treatment. IRA distributions are not eligible for capital gains treatment or lump-sum income averaging.