Exceptions to tax on early distributions

[gcheadenmetts]

I am under age 55, and i was laid off from my job and had to take an early distribution from my IRA to pay for medical insurance.  According to an IRS publication, this distribution will not be subject to the 10% additional early distribution tax.  How do I generate Form 5329 in the Turbo Tax software?

[MindyB]

The 5329 will generate automatically when you input the relevant information.  

To enter the exception to the penalty, go to the 1099-R section where you will input the amount received from your retirement account, and continue through the interview screens until you see the screen These situations may lower your tax bill. Beneath the description Extent of medical expenses, you can enter the allowable medical expenses you have, including insurance premiums in the box. 

The insurance premiums can be deducted if:

• You received unemployment compensation for at least 12 consecutive weeks.
• You take the distribution in the year you received unemployment or the following year

You can also deduct other medical expenses, but only expenses that exceed 7.5% of your AGI are allowable.  You must figure your AGI, multiple it by 7.5%, and deduct the result from your total medical expenses. Enter that reduced amount (if applicable) in the Extent of medical expenses box in addition to the unemployed health insurance premiums.

Here is some more information from the IRS: Retirement topics - Exceptions to tax on early distributions