At tax time, age matters. Taxpayers who take distributions from their retirement accounts before age 59½ will generally owe a penalty of 10% of the amount. Exceptions exist, such as the need to pay documented medical bills (within statutory limits). One taxpayer, a software developer under age 59½, took a distribution after losing his job. He claimed to qualify for a disability exception due to having diabetes. However, his diagnosis of diabetes was from a prior year, and he’d been able to treat the condition and work until the year at issue. He didn’t show that he was “unable to engage in any substantial gainful activity.” The U.S. Tax Court upheld the penalty. (TC Memo 2023-9)
