The amounts are to be ncluded in box 1- charges or payments for qualified
long-term care insurance contracts under combined
arrangements. Enter Code W in box 7. It was paid out on you behalf regardless if you received the cash. This amount is taxable and subject to the 10% penalty.
Penalty Exceptions. There are very few exceptions to the penalty on Retirement
distributions. Allowable exceptions to the 10% early (before age 59-1/2)
withdrawal penalty are:
- 1. Rollovers to another IRA (no tax
due)
- 2. Disability
- 3. Medical costs exceeding 7-1/2% of
AGI
- 4. Separation from service at age 55 or
older (pensions & 401K but not IRAs)
- 5. Substantially equal periodic payments
(SEPP)
- 6. Military reservist called to active
duty
- 7. Public safety employees separated
after age 50
- 8. IRS levy
- 9. Education expenses (Only IRAs; not
available for withdrawals from 401k plans)
- 10. Court ordered spousal payments
- 11. First time home buyer (Only IRAs;
not available for withdrawals from 401k plans)
- 12. Beneficiary
- 13. Unemployed Medical Insurance
- 14. Age 59-1/2
Instructions for this code: Use Code W for charges or payments for purchasing qualified long-term care
insurance contracts under combined arrangements which are excludable under
section 72(e)(11) against the cash value of an annuity contract or the cash
surrender value of a life insurance contract.
As you can see this is not one of the exceptions to the penalty.
