401k early withdrawl

Forum|Forum|3 years ago
January 21, 2023
3 replies
18 views

Can you request 10% fee waive for early 401k withdrawal with turbo tax?

Not A Product Question

Best answer by dmertz

Expert Reviewed

When you enter a Form 1099-R that reports an early distribution, TurboTax will present a page where it asks if any of the listed penalty exceptions apply.

Penalty exceptions exempt you from the penalty. They are not waivers of the penalty, they are reasons that the penalty does not apply at all. The IRS has no authority to waive an early-distribution penalty.

bluedeb

Alumni - Champ

Generally, anyone can make an early withdrawal from 401(k) plans at any time and for any reason. However, these distributions typically count as taxable income.

If you're under the age of 59½, you typically have to pay a 10% penalty on the amount withdrawn. The IRS does allow some exceptions to the penalty, including:

Total and permanent disability.
Unreimbursed medical expenses (greater than 7.5% of adjusted gross income).
Employee separated from service at age 55 or older (age 50 for most public safety employees) but only from the plan at the job you are leaving.

Some 401(k) plans allow participants to take hardship distributions while you are still participating in the plan. Each plan sets its own criteria for what constitutes a hardship, but they usually include things like:

Medical or funeral expenses
Avoiding eviction or foreclosure
The cost of repairing damage to the employee's home

Hardship withdrawals don't qualify for an exception to the 10% early withdrawal penalty unless the employee is age 59½ or older or qualifies for one of the exceptions listed above.

Are there exceptions to the early distribution penalty on an IRA?

https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/exceptions-early-distribution-penalty-ira/L5LYJFPpH_US_en_US

Opus 17

Level 15

If you are under age 59-1/2 and you enter a 1099-R for a withdrawal, Turbotax will ask if any of the penalty exceptions apply (if the reason for the withdrawal fits one of the exceptions in the law.)

You can't "request an exemption" from the IRS if you don't meet one of the rules in the law, you can only answer the program yes or no that you meet one of those exceptions.

bluedeb

Alumni - Champ

@Opus 17 Already answered this post with all the correct information. Not sure why after 2 hours you added basically the same information.

Opus 17

Level 15

@bluedeb

it is never my intention to give offense.

Two points. First, you indicated the TurboTax “can“ help with the situation. I thought I should clarify the TurboTax will present checkboxes so that the taxpayer can check the reason for the appropriate exception, if it applies to them.

Second, the taxpayer indicated they wanted to “request” an exception. I wanted to clarify for the taxpayer that an exception cannot be requested from the IRS, the taxpayer can only claim an exception that already exists under the law, if that situation applies to them.

dmertzAnswer

Level 15

Expert Reviewed

When you enter a Form 1099-R that reports an early distribution, TurboTax will present a page where it asks if any of the listed penalty exceptions apply.