I prepaid my 10% early withdrawl fee on a 401k distribution, but the turbotax system is assessing an additional fee, how do I fix this?

[Melissasoto30]

I received a 1099-R for an early 401K withdrawal.  I prepaid the federal tax and early withdrawal penalty of 10% at the time of withdrawal.  TurboTax is assessing another 10% early withdrawal fee in the calculation of my refund.  How do I get the turbotax system to accurately reflect that the fee has been paid.

[VolvoGirl]

It has to break out and list the 10% early withdrawal penalty separately on your return.  It's on 1040 line 59. Then you will get credit for the withholding on line 64.

You didn't actually pay the tax or 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½).  You had taxes withheld like from your paycheck. You still have to enter the whole amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket)  and then the withholding is subtracted from the total tax to figure your refund or tax due.  The withholding will show up on 1040 line 64 (1040A line 40).   The 10% penalty is on 1040 line 59.

[Melissasoto30]

It is reducing my refund by the 10% penalty fee.  How do I change that?

[VolvoGirl]

It is suppose to do that.  As I said you didn't really pay the penalty yet.  You get credit for all  the tax you paid on line 64.

[BrandyMoore]

Is this penalty new because I pulled my 401 out on 2016 and didn’t pay that?

[VolvoGirl]

No there has always been the 10% Early Withdrawal Penalty if you were under 59 1/2.  Unless you had an exception to the penalty or you moved it to another 401K or IRA account within 60 days.   @dmertz 

[dmertz]

There have been no recent changes to the penalty exceptions except for adding certain individuals to the group that is considered to be Public Safety Employees and exceptions for qualified disaster distributions.