Qualified birth or adoption early 401k withdraw

[momof51989]

I had twins last year and withdrew all of my 401k early. For qualified "birth or adoption" can I enter in only $5,000 or $10,000? Do I also have to claim the twins on my income tax return for this to be eligible? Will I need to paper file?

[leeloo]

Instructions for Form 5329 says this:

19 Qualified birth or adoption distributions. Attach a statement that provides the name, age, and TIN of the child or eligible adoptee.

Since you can't attach statements in the program, you would need to mail it. While this doesn't strictly address claiming them as dependents, I would think that might be a given.

Topic 410 limits the amount to $5,000 

Additional 10% Tax on Early Distributions

If you receive pension or annuity payments before age 59½, you may be subject to an additional 10% tax on early distributions, unless the distribution qualifies for an exception. The additional tax generally doesn't apply to any part of a distribution that's tax-free or to any of the following types of distributions:

• Distributions made as a part of a series of substantially equal periodic payments that begins after your separation from service.
• Distributions made because you're totally and permanently disabled.
• Distributions made on or after the death of the plan participant or contract holder.
• Distributions made after your separation from service and in or after the year you reached age 55.
• Distributions up to $5,000 made within a year of the birth or adoption of your child to cover birth or adoption expenses.

https://www.irs.gov/taxtopics/tc410

[JohnB5677]

Although the statute isn't clear, Notice 2020-68 D. SECTION 113 OF THE SECURE ACT Page 13 confirms that the $5,000 limit applies per child. For example, if an employee gives birth to or adopts twins, the employee can request two QBOADs (up to $10,000).

Yes, if they were born in 2022, they must be included on your tax return to qualify for the exception.  If they were born in 2023 you do not qualify for the exclusion because you would have to make the withdrawal after they are born.

After the birth of a child, a parent is allowed to distribute up to $5,000 out of either an IRA or a 401(k) plan.  Notice the word “after”.  You are not allowed to withdraw the money prior to the child being born.  

New parents have up to 12 months following the date of birth to process the distribution from their retirement accounts and avoid the 10% early withdrawal penalty.

Exceptions to the 10% additional tax apply to an early distribution from a traditional or Roth IRA that is:

• Not in excess of $5,000 and the distribution is a qualified birth or adoption distribution.

[tivo44]

1) Does the child birth exception include a $5k distribution from a Roth IRA?

2) if I rolled over money from my existing Roth IRA into my spouses IRA, can I immediately withdraw $5k from each account to avoid the 10% penalty (and only pay income taxes) or is there a warning period or rule against this?

[Opus 17]

It's a maximum of $5000 per taxpayer (account holder), not $5000 per child.

[Opus 17]

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@tivo44 wrote:

1) Does the child birth exception include a $5k distribution from a Roth IRA?

2) if I rolled over money from my existing Roth IRA into my spouses IRA, can I immediately withdraw $5k from each account to avoid the 10% penalty (and only pay income taxes) or is there a warning period or rule against this?

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Already answered (this is a duplicate post)

[tivo44]

I understand that it's $5k per account holder, that's why I was asking if there was anyway to transfer earnings (no oroginal contributions are remaining in account, only unrealized gains) from my Roth IRA to my wife's IRA without incurring a penalty or taxes like a withdrawal would be. It looks that isn't possible and I'll only be able fo withdraw $5k from my account, pay income taxes, and be able to avoid the 10% penalty.