Excise Tax

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Dictionary Says

Definition of 'Excise Tax'

1. An indirect tax charged on the sale of a particular good.

2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the Internal Revenue Service (IRS).
Investopedia Says

Investopedia explains 'Excise Tax'

1. Excise taxes are considered an indirect form of taxation because the government does not directly apply the tax. An intermediary, either the producer or merchant, is charged and then must pay the tax to the government. These taxes can be categorized in two ways:

- Ad Valorem: A fixed percentage is charged on a particular good.
- Specific: A fixed dollar amount dependent upon the quantity purchased is charged.

2. Here are some examples of situations in which excises taxes are charged on transactions in retirement accounts:

- A 6% excise tax applies to excess IRA contributions that are not corrected by the applicable deadline.
- A 10% excise tax applies to distributions from an IRA, qualified plan or 403(b) account that occur before the participant reaches age 59.5.
- A 50% excise tax applies to required minimum distribution amounts not withdrawn by the applicable deadline (referred to as an excess-accumulation penalty).

Articles Of Interest

  1.

    Retirement Plan Tax Form 5329: When To File

    Read this if you've taken early distributions or owe excess-contribution or excess-accumulation penalties.

  2. Tax-Saving Advice For IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.

  3. An Introduction To Correcting Ineligible IRA Contributions

    Eager to save for retirement? Find out how to avoid overpayment penalties.

  4. Avoiding IRS Penalties On Your IRA Assets

    The best way to avoid additional charges and taxes is to know which transactions have expensive consequences.

  5. 5 Ways To Lose Your Retirement Nest Egg

    These common mistakes can put your savings at risk. Find out how to avoid them.

  6. Preparing For Retirement Plan RMD Season

    Paying taxes is inevitable - that's why you need to learn about the rules for required minimum distributions.

  7. Paying Uncle Sam: From Tobacco To $1 Trillion

    The services we rely on, like education, law and security, were built on taxes.

  8. Will I incur a tax penalty when making withdrawls from my IRA in excess of my SEPP?

    Unfortunately, the IRA is "locked" for five years because of the requirement that the substantially equal periodic payment (SEPP) must continue for five years or until you reach age 59.5, whichever ...

  9. What are the exceptions to the early distribution penalty for a non-qualified Roth IRA distribution?

    The exceptions are as follows: The distribution is made on or after the date you reach age 59.5 The distribution is made while you are disabled and you can furnish proof that you ...

  10. Has Income Tax Become A Class Tax On The Poor?

    With more than 33% of American families falling close to the poverty line despite their adult members holding full-time employment, a rising number of citizens are being forced to pay a rate ...
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