What's the difference between the Mafia's collection process and the IRS's? The Mafia doesn't send out written delinquency notices. But there is one thing they both have in common - the ability to instill fear!
Taking money out of a tax-deferred retirement plan before age 59 1/2 can result in a 10% penalty of the amount distributed.
Generally, distributions 401before age 59 1/2 are subject to a 10% early distribution penalty. However, there are exceptions.
Penalties may be reduced or removed completely for reasonable cause. To request a penalty reduction, send a statement to the IRS explaining the facts. You, or your representative, with a power of attorney, must sign your statement under penalty of perjury.
Unlike IRS penalties, where the IRS is permitted to remove or reduce a penalty based on reasonable cause, the law does not permit the IRS to remove or reduce interest based on reasonable cause. However, there is a situation when the IRS will remove interest.