Attention FAE Customers:
Please be aware that NASBA credits are awarded based on whether the events are webcast or in-person, as well as on the number of CPE credits.
Please check the event registration page to see if NASBA credits are being awarded for the programs you select.

Want to save this page for later?


Press Release

NY CPAs Want Congress to Temporarily Waive Tax Penalties on Early Retirement Withdrawals

Alonza Robertson, NYSSCPA Media Relations Manager
Published Date:
Oct 3, 2012
NEW YORK – (October 3, 2012) - Congress should consider new legislation to temporarily waive IRS penalties for taxpayers who are forced to make early withdrawals from retirement accounts due to financial hardship caused by the economic crisis, a New York professional accounting association proposed Wednesday.
The New York State Society of Certified Public Accountants ( expressed its concerns about a burdensome additional 10% tax penalty levied on individuals, in dire circumstances, who take early distributions from qualified retirement plans.
“The current economic downturn has caused extraordinarily high levels of unemployment and caused severe and negative impacts that have forced many to withdraw assets from these accounts to meet basic living expenses,” said Gail Kinsella, president of the 28,000 member organization, in a letter to N.Y. Senator Charles Schumer. “(The withdrawals) have become the last resort for many taxpayers looking to avoid foreclosure, tax liens and bankruptcy.”
NYSSCPA is calling for Congressional legislation that would enact a number of targeted, short-term exceptions to the 10 percent additional tax as currently enforced by Internal Revenue Code (IRC) Section 72(t).
“The penalty is a double whammy for many who are turning to these monies because they have a tremendous need,” said Steve Valenti, of the NYSSCPA Tax Division Oversight Committee.
The NYSSCPA – which is only seeking the elimination of the extra tax, (the original distribution would still be considered taxable income) – recommended a series of possible circumstances that should qualify for the exception. Those include:
  • Payments to prevent foreclosure on a principal residence.
  • Payments for a student loan of the taxpayer, their spouse or their child.
  • Long-term unemployment (individuals who have exhausted their 26 week basic unemployment benefit on or before the due date, including extensions, of their tax return).
  • To pay a Federal, state or local tax lien.
  • Extent to which a taxpayer is insolvent at the time of distribution (ignoring the amount of distribution).
  • As part of a court-ordered bankruptcy payment plan.
  • Deemed distribution of a loan under IRC Section 72(p), if caused by involuntary loss of employment (by layoff or termination).
The group proposed that the exception be retroactive to Jan. 1, 2010 and continue through Dec. 31, 2014.
Congress already allows some special circumstances where the additional 10 percent tax on an early distribution would be inappropriate or unreasonable. Among them are: death or disability of the taxpayer, eligible medical expenses, higher education expenses, health insurance premiums for unemployed individuals, a tax levy  and first-time purchase of a home. 
“The fact that an exception currently exists for one to purchase a home suggests it would be reasonable to provide an exception for one to save their home in a distressed economic climate,” Kinsella said.
Congress has in the past created short-term targeted exceptions to address specific causes of economic distress to taxpayers: the HEART Act of 2008, which created an exception for qualified reservists called to active duty and the Katrina Emergency Tax Relief Act of 2005, which created an exception for victims of Hurricane Katrina (later expanded to include Hurricanes Rita and Wilma).
“We want to be a very pro-active voice on this critical issue,” Valenti said. “Folks need our help and we hope to raise awareness of this proposal that can help them deal with the circumstances many are enduring right now.”
For more information contact Alonza Robertson at 212. 719.8405 or via email at