Question

Monica, age 30, is a participant in her company's SIMPLE IRA. She withdrew $25,000 from the SIMPLE this year. She has been a participant for 18 months. What are the implications?

a.) She will have to pay income taxes on the withdrawn amount as well as a 10% early withdrawal penalty.
b.) She will have to pay income taxes on the withdrawn amount as well as a 25% early withdrawal penalty.
c.) She will have to pay a 10% early withdrawal penalty, but there will be no income taxes on the withdrawn amount.
d.) She will have to pay income taxes but there will be no penalty.

Answer 1

Monica will have to pay income taxes on the withdrawn amount as well as a 10% early withdrawal penalty.

Step-by-step explanation:

Monica, age 30, withdrew $25,000 from her company's SIMPLE IRA this year. Since she has been a participant for 18 months, this withdrawal is subject to both income taxes and an early withdrawal penalty. The implications for Monica are that she will have to pay income taxes on the withdrawn amount as well as a 10% early withdrawal penalty. Therefore, option a) is the correct answer.