Is the 10% Penalty on Early Withdrawal Waiver For 2022?

Distributions from retirement accounts before age 59 1/2 would typically incur an extra 10% tax penalty in addition to regular income taxes owed. But the CARES Act of 2020 permits certain people to withdraw funds without incurring this extra levy.

Below are a few exemptions to the penalty: Total and permanent disability; medically necessary home purchase; unreimbursed medical expenses exceeding 7.5% of adjusted gross income; and unexpected financial needs caused by disaster.

Excess Contirbutions

Typically, withdrawals from IRAs and other retirement plans before age 59 1/2 incur an extra 10% penalty tax in addition to income taxes. Under this new law, however, exceptions have been created which allow savers to withdraw funds without penalty under specific conditions.

Withdrawing funds prior to age 59 1/2 can also compromise future financial needs and cost you in the form of reduced long-term savings growth, which would otherwise have been enhanced through tax-deferred compounding. Undergoing a successful corrective distribution or dollar-limited distribution would eliminate excise penalties from all years in which an excess contribution existed in an account; an ordinary distribution would do the same; exceptions might include medical emergencies or termination due to domestic abuse.

IRS Levy

The IRS can take swift and severe actions against taxpayers who owe tax debt. A levy is one of their most serious actions that could limit your ability to pay your bills and care for your family.

A levy typically only has an immediate, one-time effect and takes only the amount in your account at the moment your bank sends it over to the IRS. Once issued, any funds that enter your account cannot be levied again until an agreement is made between yourself and the IRS to resolve debt or an appeal is filed with their independent office of appeals.

You may request the IRS release a levy if it would cause immediate economic hardship, as detailed in Publication 1660: Collection Appeal RightsPDF. For more information regarding your appeal rights.


Millions of people have amassed savings in tax-deferred retirement accounts and other tax-advantaged savings plans, but may need access to some of this cash prior to age 59 1/2 for disability-related needs.

To qualify for Social Security Disability benefits, one must have a medical condition which prevents them from engaging in significant gainful activity. While this requirement is stringent and subjective, Social Security disability should never be used as an excuse.

Critics contend that gatekeeping based on these assessments lacks epistemic trustworthiness; some advocates of disability use “people-first language” to emphasize how disability is not biologically fixed, an approach reflected by major legislation on disability rights such as the Americans with Disabilities Act and UN Convention on the Rights of Persons With Disabilities.

Unreimbursed Medical Expenses

The IRS allows taxpayers who itemize deductions to deduct unreimbursed medical expenses that exceed 7.5% of their adjusted gross income as qualifying deductions, provided they itemize instead of taking the standard deduction. Eligible expenses include insurance co-payments and deductibles, visits to doctors or dentists, hospital stays for treatment costs such as stays for acute conditions like cancer or HIV infection, prescription medication costs, dental/vision care bills, prescription medicine costs, acupuncture treatments or addiction treatment treatments as well as travel expenses in pursuit of medical care.

CARES Act also allowed retirees to withdraw up to $100k penalty-free from retirement savings accounts under COVID-19 for other purposes; however, such withdrawals would still be taxed and might place holders into higher tax brackets requiring greater tax payments.


Beneficiaries are individuals or trusts you designate to receive any balance in an account or policy upon your death, such as through wills, life insurance policies and investment accounts. When you name beneficiaries on bank accounts or investments accounts, assets automatically transfer upon your passing without going through probate proceedings.

IRS rules permit savers to withdraw retirement savings in certain instances without incurring penalties, such as hardship distributions to meet an immediate financial need, higher education expenses or buying their first home. Any withdrawal before age 59 1/2 still counts as taxable income and could place you into a higher tax bracket, potentially necessitating more taxes from being withheld from future withdrawals from an IRA account.

Under a 2022 law, some withdrawals related to COVID-19 could qualify for exemption from the 10% early withdrawal penalty, along with expanded medical expenses and forgoing minimum distribution rules in 401(k) plans.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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