To enter the exception for the penalty, follow these steps:
- Several questions after entering your 1099-R, you will get a screen that says: Let's see if we can reduce your early withdrawal penalty
- Select Continue
- Enter $5,000 in the area for Another reason, select Continue
- The next screen should remove the penalty.
For the Qualified Birth or Adoption Distributions, the IRS requires you to attach a statement that provides the name, age, and tax id number of the child or eligible adoptee. Because of this requirement, you will need to paper file your return.
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