The 5329 will show the exception that will nullify the 10% penalty.
Do this.
Enter the 1099-R. Enter the distributions code of '1' if that's what it is.
After you have finished the 1099-R entry, TurboTax will finally get around to asking about the disaster distributions and then about nondeductible contributions. Say NO (if true), then Continue. Then TurboTax will say, "Lets see if we can reduce your early withdrawal penalty" I just want to prepare you that you have to go a long way to get to this screen.
Hit Continue. Soon now you will come to "Did you use your IRA to pay for any of these expenses?" Look at the very bottom: "Another reason". Open the Learn More. The first item listed is "You were older than 59 1/2 when you took out the money."
Enter the amount of the distribution. on Form 5329, the penalty will be waived.
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