I took a lump sum pension payout. Pre tax $ were rolled over. Some of the money was an after tax contribution that I cashed out. Where do I report the 10% tax penalty?

Forum|Forum|6 years ago
March 27, 2020
1 reply
6 views

Specifically, where in TurboTax as it says I don't owe anything, but I know I do.

TurboTax Deluxe Online

macuser_22

Alumni - Champ

How is this reported to you? Do yiu have one or two 1099-R's What code is in box 7? What is in box 2a? What is in box 5?

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

t1812neagleAuthor

Level 2

Here are the filled boxes on the 1099-R:

1 Gross Distribution

2b (only "Total distribution" checked)

5 Employee contribution (same amount as Box 1)

7 Distribution code (code entered is "1-early distribution")

Subsequent to entering the 1099-R in TT, several screens pop up.

First, an informational screen: 'About the money taken out of this account'...it says "Based on the code in Box 7 of this 1099-R, you're paying extra tax on this money."

This is correct as I am not yet 59 1/2.

Second, 'What did you do with the money from this payer'. I checked that I cashed it out.

After I went through all the screens, my Federal Refund was not reduced by the 10% penalty.

I then went to Other Tax Situations/Additional Tax Payments/Extra Tax on Early Retirement Withdrawals to try to enter the 10% penalty.

When I click on "Revisit", it says "No Early Retirement Withdrawals" followed by 'There's no extra tax to pay because I took no withdrawals from a retirement account before retirement age'.

Clearly this is incorrect.

According to IRS Topic No. 557 (additional tax on early distributions), it says that if Box 7 has distribution code "1" I need only enter the additional 10% tax directly on Schedule 2 of 1040. TT does not generate Schedule 2. As I went to Tools/Delete Forms and it is not listed.

macuser_22

Alumni - Champ

You first said that the pre-tax money was rolled over.

That 1099-R with box 5 the same as box 1 says that that is ALL after-tax money. Is there a 2nd 1099-R for the amount rolled over?

How to properly enter this depends if there are one or two 1099-R's.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**