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Can you explain what is the phrase "Separation from service" refers too, on form 5329
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
You are not required to pay the early withdrawal penalty at all. "Separation from service" means you left the job, whether by retirement, quitting, fired or laid off. The distribution (withdrawal) in 2016, from your previous employer's 401k, does qualify for the separation from service exception, to the early (before age 59-1/2) withdrawal penalty because you were 55 or over when you separated. There is no time limit for the withdrawal.
Had you rolled over the 401k to an IRA, any subsequent distribution from the IRA would not qualify (but might qualify for the home buyer exception). Home buying is not a penalty exception to a 401k distribution (only IRAs).
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
You are not required to pay the early withdrawal penalty at all. "Separation from service" means you left the job, whether by retirement, quitting, fired or laid off. The distribution (withdrawal) in 2016, from your previous employer's 401k, does qualify for the separation from service exception, to the early (before age 59-1/2) withdrawal penalty because you were 55 or over when you separated. There is no time limit for the withdrawal.
Had you rolled over the 401k to an IRA, any subsequent distribution from the IRA would not qualify (but might qualify for the home buyer exception). Home buying is not a penalty exception to a 401k distribution (only IRAs).
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
The the administrator of the original 401(k) plan should know your age and your separation date, so the administrator should code the distribution with code 2 in box 7 of the Form 1099-R reporting any distributions from the plan. Code 2 indicates that an exception known by the administrator (the age 55 exception) applies. In such case, no Form 5329 will be generated by TurboTax with regard to this distribution. If the administrator uses code 1 instead, it will be your responsibility to claim the age 55 exception on Form 5329.
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
A clarification question. Turn 55 in 2018 & separate from employer in June 2018. Would a 401K distribution in March 2018 still be exempt from the 10% penalty? ..or do you need to distribute after the separation in June to qualify for the exemption?
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Can you explain what is the phrase "Separation from service" refers too, on form 5329
No, a distribution prior to separation from service does not qualify for the age-55 exception.