401(K) early withdraw exception

Forum|Forum|7 years ago
June 1, 2019
3 replies
4 views

I was reading a post about exceptions for early withdraws from a companies pension plan. Can you please provide a few more details " 4. Separation from service at age 55 or older (pensions & 401K but not IRAs)." and what forms are required to the IRS? Thank you

TurboTax Deluxe Online

ophie31157

Level 2

HOW DO I REPORT THAT I QUALIFY FOR THE EXCEPTION

macuser_22

Alumni - Champ

@ophie31157 - enter your 1099-R and answer the followup questions - one will list the exceptions.

**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.**

LarryDonMcMillin

Level 2

I am still looking for instructions for REPORTING my exception to the 591/2 penalty rule...…..The IRA and Pension publication lists 8 exceptions, mine is for medical expenses, but don't know how to report it.

JFRAHER

Level 7

The exceptions will be in the follow up questions.

After you enter your 1099-R and hit Continue.

You will continue through several screens (most have to do with disaster withdrawals and repayments)

You will come to a screen titled Let’s See If We Can Lower Your Tax Bill

Hit Continue what you are looking for is on the next page

Note: Excludible medical expenses are those above 7.5% of your Adjusted Gross Income (AGI)

Opus 17

Level 15

Th exceptions are listed here. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...

The one you may be asking about is that, for certain employer-sponsored plans, you can withdraw without the penalty if you are over 55 AND separated from service with the company. (The normal age to be exempt from the early withdrawal penalty is 59-1/2.)

When you withdraw from a retirement plan, the plan administrator sends you a 1099-R income statement by January 31 of the next year. That income is reported on your tax return. There are questions in Turbotax that will allow you to indicate if you qualify for an exemption and prepare the correct forms.

All withdrawals from tax-advantaged plans are subject to regular income tax. The exemption only applies to the additional 10% penalty for early withdrawals.

dmertz

Level 15

The IRS description of the exception you are asking about is "the employee separates from service during or after the year the employee reaches age 55 (age 50 for public safety employees of a state, or political subdivision of a state, in a governmental defined benefit plan)"

The exception applies to distributions from the plan provided by the company from which the employee separated from service during or after the year in which the employee reached age 55. If the employee separates from service from this company before the year in which they reached (or will reach) age 55, the exception does not apply.