A distribution for ESOP employer stock dividends is one of the Other Reasons that eliminate the penalty. Other early distribution penalty exemptions: You were older than 59 1/2 when you took out the money.You had to split your retirement with your spouse or former spouse under a qualified domestic relations order (QDRO). (This is not available for IRA accounts.)You had a qualified birth or adoption distribution. The amount permitted per qualifying child is $5,000 if made during the year the child is born or the legal adoption is finalized. You can distribute $10,000 for a joint return if each parent has a qualified retirement plan.You took the money out of a section 457 plan that you didn't originally roll over from another retirement plan that was a qualified plan.Money from an employer plan if you stopped working there by March 1, 1986, you have a written schedule for the payout of the money, and you get the payments according to the schedule.ESOP employer stock dividendsMoney from a deferred annuity contract that was invested in before August 14, 1982.Money from a deferred annuity contract for a personal injury settlement.Money from a deferred annuity contract purchased by your employer because the employer's retirement plan or retirement annuity plan terminated. The employer held the annuity contract until you stopped working there.Money from a single-purchase annuity that provides equal payments (at least once a year) that begin within one year from the annuity purchase.Money from a phased retirement annuity made to federal employees.Check with your administrator and verify if your ESOP distribution qualifies.

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revmgrant

Level 1

Question

I received 1099-R for distribution from my ESOP, 20% was taken out. On screen "These Situations May Lower Your Tax Bill", should I show distribution on "Other Reason"?

Forum|Forum|2 years ago
February 6, 2024
2 replies
27 views

No text available

TurboTax Deluxe Online

DawnC

Employee Tax Expert

A distribution for ESOP employer stock dividends is one of the Other Reasons that eliminate the penalty. Other early distribution penalty exemptions:

You were older than 59 1/2 when you took out the money.
You had to split your retirement with your spouse or former spouse under a qualified domestic relations order (QDRO). (This is not available for IRA accounts.)
You had a qualified birth or adoption distribution. The amount permitted per qualifying child is $5,000 if made during the year the child is born or the legal adoption is finalized. You can distribute $10,000 for a joint return if each parent has a qualified retirement plan.
You took the money out of a section 457 plan that you didn't originally roll over from another retirement plan that was a qualified plan.
Money from an employer plan if you stopped working there by March 1, 1986, you have a written schedule for the payout of the money, and you get the payments according to the schedule.
ESOP employer stock dividends
Money from a deferred annuity contract that was invested in before August 14, 1982.
Money from a deferred annuity contract for a personal injury settlement.
Money from a deferred annuity contract purchased by your employer because the employer's retirement plan or retirement annuity plan terminated. The employer held the annuity contract until you stopped working there.
Money from a single-purchase annuity that provides equal payments (at least once a year) that begin within one year from the annuity purchase.
Money from a phased retirement annuity made to federal employees.

Check with your administrator and verify if your ESOP distribution qualifies.

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dmertz

Level 15

No. Other reason does not apply. If TurboTax indicates that the distribution is subject to an early-distribution penalty, the distribution is not a distribution of ESOP dividends which TurboTax already knows would be penalty-free because they would be reported with code U in box 7 of the Form 1099-R.

The only exceptions that might apply are the other exceptions in the list that @DawnC provided.