Hi everyone,
I've read and researched the Rule of 55 extensively but outside of the actual rules nobody talks about the implementation mechanics, how does it work in real life? I find it suspiciously too easy to just file regular taxes and as long as the rules are met - no penalty is levied (completely understanding that 401k distribution is "income" and subject to Fed and State income tax)? The topic here is strictly about the early distribution penalty.
Is there any specific IRS form which is filed with one's taxes to seek the exemption from a 10% early distribution penalty? If there's no form how does IRS actually determine whether you owe a penalty or not? The 401k plan itself does NOT take out penalty upon distributions, only 20% FedTax and for specific states - mandatory State Tax but that's about it.
Have any of you actually done this and if yes please share your experience and how it worked for you?
PS. Does TurboTax detect when 401k 1099 is used and trigger some kind of interview questionnaire around the penalty piece?
Thank you
Boyan
