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.
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?
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 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?
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.