dmertz
Level 15

Retirement tax questions

Only the $146.73 is taxable, so that's the amount on which you claim the exception to the penalty.  The $6,500 is nontaxable and therefore already not subject to penalty, so no exception is to be claimed for that portion.  So in the box referred to in item 12, enter $146.73.  If everything else was done right, that will eliminate all of the penalty.