Is a distribution from 401k penalty free if we had a baby this year?

[tylergunderson45]

Distribution was under $5k

[ThomasM125]

Yes, you can exclude up to $5,000 of an early distribution from a 401-K from penalty if used for care of a new born.

[tylergunderson45]

Ok that is what I thought but when I entered the 1099-R it doesn’t have a birth exception within any of the questions it asks after. So it decreased my return by more than 10%. Does it ask more questions later?

[AnnetteB6]

The categories for an exception to the early distribution penalty will be shown on a follow-up screen as you are leaving the section where Form 1099-R information is entered.

The screen will be titled 'These Situations May Lower Your Tax Bill'.  Look for a box labeled Qualified Birth or Adoption Distributions.

@tylergunderson45 

[Opus 17]

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@tylergunderson45 wrote:

Ok that is what I thought but when I entered the 1099-R it doesn’t have a birth exception within any of the questions it asks after. So it decreased my return by more than 10%. Does it ask more questions later?

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Be aware that a withdrawal is only penalty-free if it is after the birth of the child (up to one year after).  A withdrawal before the child is born is not eligible for the penalty exemption.  It may not make sense, but that's how the law was written.