L&HNew Yorkmedium
A 55-year-old NY resident takes a $20,000 non-qualified withdrawal of gain from a deferred annuity. What is the New York-specific tax consequence beyond the federal 10% IRC § 72(q) early-withdrawal penalty?
ANY imposes an additional 2.5% state premature-withdrawal surtax
BNY waives the federal penalty for residents over age 50
NY imposes no additional state-level premature-withdrawal surtax beyond the federal 10% penalty
DNY imposes a flat $500 administrative fee on every annuity withdrawal
Why this is the answer
The federal IRC § 72(q) imposes a 10% penalty on the taxable portion of an annuity distribution taken before age 59½, with limited exceptions (death, disability, substantially equal payments). Unlike California (which adds a 2.5% state surtax) some students assume every state mirrors that. NY does not — there is no additional state premature-withdrawal surtax on annuities. NY merely taxes the gain as ordinary income at NY State income tax rates. Option A (the 2.5% figure is CA, not NY), Option B (NY does not waive the federal penalty), and Option D (no flat fee) are all wrong.
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