nbtpiano
New Member

TT Online says I do not have to pay 10% early penalty on retirement funds I received and cashed in as an alternate payee under a QDRO. Others say no. Which is correct?

I received a distribution as court-ordered divorce proceedings from ex-spouse's retirement fund and had to cash in for living expenses. When I added amount distributed under TT's exception to an alternate payee under a qualified domestic relations order, the 10 % penalty was removed from the ongoing calculations. Yet other community sources say I still owe the 10% penalty. I prefer the TT version, but do not want to irritate the IRS. Which version is correct and why does TT say no early distribution penalty?

dmertz
Level 15

Retirement tax questions

Yes, if the distribution is paid from your ex-spouse's retirement plan to you as an alternate payee under a QDRO, you can claim this penalty exception.  See section 72(t)(2)(C):  https://www.law.cornell.edu/uscode/text/26/72



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