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When Is a Tax a Tax and Not a Penalty?

Jan. 28, 2021, 9:45 AM

Words matter. I have this conversation with my kids—it feels like—a thousand times a week. “Maybe” does not mean “yes” any more than “later” is equal to “in precisely one minute.” The Tax Court reminded taxpayers of the importance of words in an opinion issued this week, Grajales v. Commissioner.

The case focuses on early distributions from a qualified retirement plan. In 2015, the taxpayer turned 42 years old. That same year, she withdrew $9,026 from her New York State pension plan. The taxpayer was issued a “Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,...

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