Most individuals know that if they withdraw funds from their traditional individual retirement account (IRA) before reaching the age of 59 1/2, they are subject to a 10% penalty in addition to having the withdrawal subject to income tax. For a taxpayer in a tax bracket as low as 15%, this means that 25% of the distribution will be paid to the IRS.
Those individuals who consult with an experienced tax professional for tax preparation and tax planning services before making such a withdrawal may be surprised to learn that they can avoid the 10% early withdrawal penalty.