Avoiding 10% penalty on early withdrawal

[bcfreeberg]

I live in Iowa and the irs form 8915a says we were declared a disaster in 2016. I took an early withdrawal from my 401k in 2017. Can I avoid the penalty if we don’t live in the specific counties that fema lists? Or because the irs form says “Iowa” can we avoid the penalty? And do we have to amend our 2016 taxes to include the 8915a form?

[LindaA]

This exception to the early distribution penalty only applies to specified disaster areas. Per the instructions for Form 8915A, to qualify for this exception your main home must have been located in a listed disaster area at any time during 2016 and you must have sustained an economic loss because of the disaster. 

[bcfreeberg]

We did lose multiple trees and had some siding come off of our home. We did not file it with insurance because we did not want our rates to go up so we just fixed or replaced everything. But my question is, we live in Iowa. Per the IRSform 8915a, we were declared a disaster. There is no specific area of Iowa on the IRS form so are we ok to claim this early withdrawal for that? And do we need to amend our 2016 taxes?

[LindaA]

 You can file the 8915A with your 2017 tax return. Keep some documentation about the loss of your trees and siding to back up your claim that you were adversely affected by the disaster just in case the IRS ever challenges your claim. 

Amendments might come into play if you decided to repay any of your qualified disaster distribution. For details, see Amending 2017 Form 8915A in the instructions for the form.

[bcfreeberg]

Thank you so much for helping. Again, 8915a says “Iowa” - do I need to look further to determine if we were actually in the areas of Iowa that were declared a disaster? 8915a does not say to. But I known it wasn’t all counties in Iowa.

[LindaA]

It would be nice if the instructions for Form 8915A were clearer so I could give you a definitive answer. If you sustained economic damage from storms in Iowa within the timeframe shown in Table 1 of said instructions one would think that you'd be all set.