I entered my 1099-R as a non-qualified plan, but was then forced to choose either Qualified retirement plan, Nonqualified annuity, or modified endowment contract. None of these match the correct selection as a non-qualified plan. I selected Qualified retirement plan, but it is adding a 10% early withdrawal penalty because I am under 59 1/2. This has not happened in previous years. How do I deal with this? I should not be paying an extra $3000 in taxes because turbotax thinks it is penalized. Military retirement is not penalized like that.
If you turned 59.5 at any time during 2020.....That's a bug....
If you edit the 1099-R from the start again, you'll come to a question about whether you received any of the $$ before you reached age 59.5....and right now you have to say NO to the question about receiving any of it under age 59.5, in order for it to post properly in the 2020 software. There is also a separate selection about it being a nonqualified plan during that initial set of questions where you can say it is a non-qualified plan. I think answering NO to the any $$ received while under 59.5 avoids the second set of "Nonqualified annuity" questions.....and also eliminates the penalty....but like I said, that's a bug that's been reported...for a military retirement with code 7 in box 7 you shouldn't get the age 59.5 question at all.
........but the IRS isn't doing anything with any tax files before 12 Feb, so there is time for TTX to correct it . See the discussion here...when it was first identified: