Ira early withdrawl penalty

4 replies
50 views

I took 5000 out of my ira to help cover my daughter's college tuition. I paid the 10% penalty in advance not knowing that I could avoid the penalty for education expense. Can the penalty be recoverd or count as taxes paid?

MayaDAnswer

Alumni - Intuit

Yes, the penalty will count as taxes paid.

If you have code 1 for early distribution in Box 7:

Enter Form 1099-R in TurboTax.
Answer the questions until you reach the screen "Let's see if we can reduce your Early Withdrawal Penalty"
Continue to the following screen and enter the Higher Education Expenses.

The 10% penalty won't be calculated and the amount you paid will count as taxes paid.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

MayaDAnswer

Alumni - Intuit

Yes, the penalty will count as taxes paid.

If you have code 1 for early distribution in Box 7:

Enter Form 1099-R in TurboTax.
Answer the questions until you reach the screen "Let's see if we can reduce your Early Withdrawal Penalty"
Continue to the following screen and enter the Higher Education Expenses.

The 10% penalty won't be calculated and the amount you paid will count as taxes paid.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

dmertz

Level 15

The 10% withheld was simply default tax withholding and does not correspond to any particular aspect of your tax liability. The amount shown in box 4 of the Form 1099-R is credited against the overall tax liability determined on your tax return.

If the qualified education expenses paid during the year exceeded the gross amount of the distribution you can indicate that the entire gross amount was used for qualified education expenses.

cnsamaz

Level 2

My DOB is 04/17/1932. Morgan Stanley made a box 4 withdrawal of $ 2170. Since I was 88 yrs old in 2020 shouldn't the box 4 amt be considered as an estimated tax?

SweetieJean

Alumni - Champ

@cnsamaz It's actually tax withheld, and will be recorded when you enter the 1099-R in Federal > Wages and Income > Retirement. (Estimated tax is when you send it in yourself, or apply it from a prior year refund.)