After you entered the 1099-R information into TurboTax there should be a follow-up question "Was this Distribution from a Qualified Plan?" answer "From a Non-Qualified Plan". Then TurboTax should not add a penalty for early withdrawal.
Thank you, I'm glad you asked that question, I had been hunting all over to find the answer. There are a lot
of retired military people out there who need to know this. Perhaps Turbo tax should
have a check box for this purpose. Retired military pension is not a qualified plan.
I know this question is old, but I followed the instructions, and I am still seeing a penalty, and there is a question saying "Let's see if we can reduce your early withdrawal penalty." I would rather file manually on paper than have TurboTax mess this up and have me owe over a thousand dollars rather than get a refund (which it would be if there was no penalty). But the system wants me to pay to speak to a person about the glitch in their system! NO!
The penalty section for the 1099-R has not been updated yet. E-filing does not start until Feb 12th, so I suggest coming back to it later. We are actively updating forms, but there is no scheduled date for the Form 8915-E yet. @edowney81
I am having the exact same issue with it adding early withdrawal penalty.
Just got off live chat with TurboTax rep. Please spread the word! I would hate to see people who don't realize it thinking they owe thousands of dollars they don't owe. No one needs that kind of stress, especially right now.
This was her response to the question:
"There is no penalty for military DFAS 1099-R form distributions, with box 7 set with a code 7, no matter whether it was before or after age 59.5.....but right now, the software isn't dealing with it properly. The programmers have been informed, but could take a couple weeks to fix."