SIE Exam Question 607: Answer and Explanation

Question: 607

Which of the following is required by the IRS if a taxpayer uses the substantially equal periodic payment (SEPP) exception to the premature distribution penalty?

• A. The taxpayer must show proof of economic hardship.
• B. The taxpayer must show proof that payments will be used to pay for qualified medical or education expenses.
• C. The taxpayer must show proof that appropriate taxes will be withheld.
• D. None of the above are correct.

Correct Answer: D

Explanation:

For the substantially equal periodic payment (SEPP) exception to the premature distribution penalty, the IRS does not require a reason for taking withdrawals.