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doitrightmyway44

Level 1

Solved

Had financial hardship.Had to cash out my wife's retirement ira, from previous employer. Who determines if our financial hardship is reasonable enough to avoid 10% tax?

Forum|Forum|7 years ago
June 1, 2019
1 reply
2 views

We have documented proof of financial hardship, is that enough to show hardship if we are audited?

TurboTax Self Employed Online

Best answer by AnnetteB6

Ultimately, the IRS and the current tax laws will determine whether you will be subject to the 10% early distribution penalty.

When you enter the information from your Form 1099-R that reports the distribution, there will be some follow-up questions (after all 1099-Rs have been entered). One of those questions will cover any possible exceptions to the early distribution penalty.

You will see a screen with the title, “Let’s See If We Can Lower Your Tax Bill” with some information and links that describe possible exceptions to the penalty. The next screen will allow you to enter the amounts from the distribution that qualify for an exception. This only excludes the additional 10% tax, not the ordinary income tax on the distribution.

For more information, here is a link to further details from the IRS: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

AnnetteB6Answer

Level 15

Ultimately, the IRS and the current tax laws will determine whether you will be subject to the 10% early distribution penalty.

When you enter the information from your Form 1099-R that reports the distribution, there will be some follow-up questions (after all 1099-Rs have been entered). One of those questions will cover any possible exceptions to the early distribution penalty.

You will see a screen with the title, “Let’s See If We Can Lower Your Tax Bill” with some information and links that describe possible exceptions to the penalty. The next screen will allow you to enter the amounts from the distribution that qualify for an exception. This only excludes the additional 10% tax, not the ordinary income tax on the distribution.

For more information, here is a link to further details from the IRS: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

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