Qualified birth and adoption expenses up to $5000 can qualify for an exception to the 10% early distribution penalty. These expenses must be incurred within 1 year of the birth or adoption. Your 1099-R would have a code 1 in box 7 if the penalty applies.
After you enter your 1099-R in, you will soon come to a screen saying "Let's see if we can lower your tax bill." Click Continue, then click the pencil icon to edit the penalty exception on the next screen. About halfway down the list, you will see "Qualified birth or adoption distributions" where you can enter the amount of those expenses there not to exceed the lesser of $5000 or the amount of the distribution.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
