The threat of an IRS levy doesn’t let you tap your retirement plan penalty-free, according to the court informed a couple under age 59½ who withdrew more than a million dollars from their plan to help pay outstanding tax debts.
After IRS assessed the 10% penalty, the couple argued it shouldn’t apply because the agency threatened to levy the account to settle multiple years of unpaid taxes. However, because there was no actual levy of the funds, the levy exception to the fine doesn’t apply.
Thompson, D.C., Calif.