I am 56 and left a job in 2017. I cashed out my 401(k). Do I have to pay the early withdrawal penalty?

[annem63]

How do I file the form 5329 in turbo tax?

[DoninGA]

What is the code in box 7 of the form 1099-R?

[DoninGA · Accepted solution]

No, there will not be an early withdrawal penalty.

Code 2 - Early distribution, exception applies (under age 59½).

[annem63]

So do I have to put it on my taxes? or file form 5329?

[DoninGA]

The code 2 in box 7 means that you would not be required to use a 5329.  But you must report the Form 1099-R on your tax return.

[annem63]

Ok. thank you

[rsacharczyk]

Does the above questions ans answers still apply for 2017 tax return?

[rsacharczyk]

I have a Code 2 - Early distribution, exception applies (under age 59½) on my 1099-R for 2018 but why is Turbo Tax is still applying the early withdrawal penalty?

[DoninGA]

Do you see an early withdrawal penalty on your 2018 tax return Form 1040 Schedule 4 Line 59?  Form 1040 Line 14?

[Anthony5362]

Similar question.

i am 56, I plan to cash out  my K401 from my previous employer. I am still working for a new company. Do I have to pay early penalty (subject to income tax etc)?

please help

[VolvoGirl]

How long ago did you leave the old employer that has the 401K?  I believe you avoid the 10% Early Withdrawal Penalty if you were 55 or older when you left the company, not when you take the withdrawal.

Even if you avoid the penalty you still owe tax on it.  

You don't actually pay the tax or 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½).  You have taxes withheld like from your paycheck. You still have to enter the whole gross original amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due.

It has to break out and show the 10% penalty separately on your return, (Schedule 4 line 59 which goes to 1040 line 14)

Then you get credit for all the withholding taken out on 1040 line 16.