What are the exceptions to 10% penalty for early withdrawal from 401(k)?

[Mark-Fenton]

Dec 31, 2012 I was laid off.  I was not allowed to take a loan or a partial withdrawal from my plan because I had been terminated from my employment
April 2013 I took a Full withdrawal from my 401(k) plan .
I used the entire net amount (plus other liquid assests) to purchase my primary residence in April 2014
In July 2014 I reached the age of 55
Does this qualify for some early withdrawal penalty' exception? or reduction?
The distribution code = 1 on the 1099-R form I received

[donnat77]

How do I tell TurboTax that I am not subject to the 10% penalty?

[truckbob40]

Can you explain the SEPP below, does it matter what the money is used for?

[dmertz]

A series of substantially equal periodic payments is a series of payments with the payment amount established under one of three permissible, explicitly defined calculation methods based on the balance of the plan or aggregate of plans subject to the plan.  A series of equal payments of some arbitrarily chosen sum would not qualify.  A SEPP plan must continue without modification (except for a permitted one-time change to the RMD method for determining the periodic distribution amount) for the longer of 5 year or until you reach age 59½, otherwise all amounts previously exempt from the penalty under the plan become subject to a recapture of the 10% penalty, except those distributions for which a different penalty exception applies.

Most of the time a SEPP plan is established with the help of the plan or IRA custodian and the custodian will then report such distributions using code 2 in box 7 of the Form 1099-R.

What you use the money for is irrelevant, except sometimes in the case where you later bust the plan and what you used the money for allows you to qualify for a different penalty exception.

[Hal_Al · Accepted solution]

No, none of what you described qualifies as an exception to the penalty. Penalty Exceptions. There are very few exceptions* to the TAX on Retirement distributions. Allowable exceptions to the 10% early (before age 59-1/2)
withdrawal penalty  are:

1. Rollovers to another IRA (no tax due)
2. Disability
3. Medical costs exceeding 10% (7-1/2% if over age 65) of AGI
4. Separation from service at age 55 or older (pensions & 401K but not IRAs)
5. Substantially equal periodic payments(SEPP)
6. Military reservist called to active duty
7. Public safety employees separated after age 50
8. IRS levy
9. Education expenses (Only IRAs; not available for withdrawals from 401k plans)
10. Court ordered spousal payments
11. First time home buyer (Only IRAs; not available for withdrawals from 401k plans)
12. Beneficiary
13. Unemployed Medical Insurance
14. Age 59-1/2

15. See the instructions for form 5329,for some other obscure exceptions http://www.irs.gov/pub/irs-pdf/i5329.pdf

*exceptions to the tax on distributions: roll overs, charitable contributions  by someone over age 70-1/2 and once-in-a-lifetime IRA to HSA transfers.

[Fern]

After you have entered all of your 1099 R forms, there are a series of questions asked to determine if you owe a penalty tax on an early withdrawal from a retirement account. Note that the penalty exclusion list is different for pension plans, 401ks and annuities than it is for IRAs.

See screenshots below.

[pgall51]

I withdrew $15,000 from my 401(k) to pay closing costs on the purchase of my home. would this be an exception to the10% penalty for early withdrawal?

[Hal_Al]

No. Only IRAs (not 401k) qualify for the first time home buyer exception and the limit is $10K.