Magazine article The CPA Journal

The New Excise Tax Window: Tax Bonanza or Tax Trap

Magazine article The CPA Journal

The New Excise Tax Window: Tax Bonanza or Tax Trap

Article excerpt

RC section 401 (a) (9) (as amended) requires that minimum distributions be made from retirement plans based upon the life expectancy of the plan participant and his or her beneficiary. All distributions are subject to ordinary income taxes at the applicable rates, and the actual effective tax rates may be higher if itemized deductions and exemptions are reduced or elim inated. State and local taxes may also be imposed with the potential of increasing the total taxes due to approximately 50% of the distribution.

Excise Taxes on Distributions Before The 1996 Changes

In addition to the above income taxes, there may be an excess distribution tax imposed on a portion of the distribution. This excise tax is payable when a distribution is in excess of the statutory thresh old, $155,000 for 1996 and $160,000 for 1997 (the threshold is increased for inflation but not necessarily every year depending upon a rounding formula). …

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