dmertz
Level 15

Retirement tax questions

There is no penalty other than that the $117 must be reported as other earned income on Form 1040 line 1h, making it taxable on your 2023 tax return, and it will be taxed again when the funds are eventually distributed as a regular distribution sometime in the future.  That means that the "penalty" is $117 times the sum of your federal and state marginal tax rates.