Early Withdrawal penalty

Forum|Forum|1 year ago
February 7, 2025
3 replies
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I paid an early withdrawal penalty on my taxable CD in 2024 but there is no entry in box 2 of the 1099-int form. Where in Turbotax does it allow me to enter that information?

Thank you,

Vic

Best answer by VolvoGirl

It is an adjustment to income. It is not part of your itemized deductions. The CD early withdrawal penalty goes on Schedule 1 line 18 which goes to 1040 line 10. It will directly reduce your income.

VolvoGirl

Level 15

There is no box 2 or penalty listed on the 1099 you got from the bank? Better check with the bank so you have the right amount. Then in Turbo Tax, you need to check the little box that says my form has more boxes and box 2 will open up for you to enter the amount.

ThomasM125

Level 15

You need to check the box that says My form has info in other boxes on the Form 1099-Int entry screen and then you will see the box where you can enter your early withdrawal penalty:

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vcromanAuthor

Level 2

Thank you for your quick response.🙂

The problem is that

I feel uncomfortable reporting this on the return as an entry coming from Box 2 on the 1099-int form when it says 0. I thought there was another place I could make the entry. The bank says they don't report early withdrawal penalties.

I am certain of the early withdrawal penalty amount. I reviewed all the accrued interest from the bank by reviewing all my statements and the total matched what was on the 1099-int. The penalty amount was one withdrawal which showed an additional amount as the penalty.

VolvoGirlAnswer

Level 15

It is an adjustment to income. It is not part of your itemized deductions. The CD early withdrawal penalty goes on Schedule 1 line 18 which goes to 1040 line 10. It will directly reduce your income.

IntuitiveInvestor

Level 2

1 thing that might help clarify the bigger picture is that early withdrawal penalties on CDs are generally deductible as an adjustment to income, even if the bank doesn’t clearly report them the way you’d expect. The irs allows you to deduct the penalty because you’re being taxed on the interest earned, and the penalty effectively reduces that gain.

If the bank didn’t include it on the 1099-INT, it’s still important to keep documentation showing the penalty amount (statements showing the withdrawal and fee), just in case there’s ever a question.

NExt time you're looking at CDs, it can also be worth reviewing early withdrawal terms before opening one. Penalties can vary quite a bit by institution and term length. Some comparison tools, like CD Valet, let you review rate details and penalty structures across banks and credit unions so you can see what the downside looks like before committing.

Hope that helps