Final answer:
Taxpayers who take early distributions from retirement accounts such as Traditional IRAs or 401(k)s for reasons not covered by exceptions in the tax code, such as funding a vacation or paying off consumer debt.
Step-by-step explanation:
The question asks which kind of taxpayer is not eligible for an exception to the 10% early distribution penalty for a retirement account. The penalty typically applies to distributions taken from a retirement account such as a Traditional IRA or a 401(k) before the age of 59½. There are several exceptions to this penalty, such as distributions taken for certain medical expenses, educational expenses, first-time home purchase, and a series of substantially equal periodic payments under Rule 72(t).
However, a taxpayer who does not meet any of the exceptions handled by the tax code would not be eligible for an exception to the 10% early distribution penalty. For instance, taking an early distribution to fund a vacation or to pay off consumer debt typically does not qualify for an exception.
Such a taxpayer will owe the penalty in addition to ordinary income taxes on the distribution. It's important for individuals to consult with a financial advisor or tax professional before taking early distributions to understand the implications and possible penalties associated with their specific situation.