How do I get the penalty on an ira withdrawal to c...
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How do I get the penalty on an ira withdrawal to credit for for the year a child was born (secure act)

 
5 Replies
Expert Alumni

How do I get the penalty on an ira withdrawal to credit for for the year a child was born (secure act)

You won't find the penalty exception for the first year a child was born or adopted in your 2019 tax return options.

 

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted Dec. 20 is effective for IRA distributions after 2019.  So, that exception to the 10% early withdrawal penalty will be available on your 2020 tax return, for withdrawals made on or after January 1, 2020.

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Level 1

How do I get the penalty on an ira withdrawal to credit for for the year a child was born (secure act)

That's what I was expecting yet that option wasn't available when I was just in turbotax trying to file my 2020 return. There is no exemption in the list related to child birth when I entered my 1099-R info.

Employee Tax Expert

How do I get the penalty on an ira withdrawal to credit for for the year a child was born (secure act)

To enter the exception for the penalty, follow these steps:

  1. Several questions after entering your 1099-R, you will get a screen that says:  Let's see if we can reduce your early withdrawal penalty
  2. Select Continue
  3. Enter $5,000 in the area for Another reason, select Continue
  4. The next screen should remove the penalty.

For the Qualified Birth or Adoption Distributions, the IRS requires you to attach a statement that provides the name, age, and tax id number of the child or eligible adoptee.  Because of this requirement, you will need to paper file your return.

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Level 1

How do I get the penalty on an ira withdrawal to credit for for the year a child was born (secure act)

Wow ok. Thanks for the info. I did end up entering the amount that way I just wasn't sure about submitting it like that since there was no info about that exemption listed in TT. 

 

Do you know what format the statement would need to be in? Does it have to be something from the state? Birth Cert? We have a verification of Birth from that was issued by the hospital but it doesn't have the SSN on it. 

Employee Tax Expert

How do I get the penalty on an ira withdrawal to credit for for the year a child was born (secure act)

There is no required format for the statement, as long as it contains the required information (Name, Age (as of 12/31/20), and Tax ID number). List this information on a separate page with title "Qualified Birth Exception".

 

You can use (but don't need) a birth certificate or hospital verification of birth, but you will have to submit an Application for Social Security Card.

 

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