If the dictionary had pictures next to each word, the U.S. Tax Code would fit nicely next to the definition of “esoteric.” But as we all know, this complex web of rules and regulations cannot be ignored. Mistakes cost money, in the form of extra taxes, penalties, and interest. Some mistakes can be fixed, but not all. Even those that can be fixed may incur IRS user fees or, at the least, professional costs to unwind the transaction.
To avoid the consequences, you must clearly understand all the applicable rules. There’s an old saying: “close only counts with horseshoes and hand grenades.” That is indeed the case when it comes to complying with the tax code. So, while there are literally hundreds of mistakes someone could make with retirement plan money, I wanted to highlight some of the more common ones (not in any particular order).