The 10% early withdraw rule doesn't apply to military retirement. TurboTax asks "Did you receive any of this money before you turned 59 1/2? A "yes" cuts my refund. Why?

[Critter-3 · Accepted solution]

The TT moderators do monitor this forum but I did mark this thread for review.  But I am certain this is due to the incomplete program ... look again in Feb closer to when you are ready to file. 

[turbogreg1]

Thanks @Critter-3 , standing by for the resolution. Turbo

[turbogreg1]

Just FYI, this is still unresolved. Also, I see a few responses to similar inquires with bad answers.  To be clear, Code 7 on a military 1099R in box 7 should prevent the 59.5 question from being asked. Military retirees do not get penalized for collecting retirement pay prior to age 59.5 (a very common situation).  

[SteamTrain]

@turbogreg1 

I was in contact with a moderator today...and it's being looked into.  Thus, probably two more weeks unless it is a simple fix that can be done by next week....but as I noted way up top, I tested a 56 year-old with the same setting, and no penalty was applied. So it appears to be just in the software flow for people who turned 59.5 at some time in 2020.

[turbogreg1]

Thanks @SteamTrain . My understanding is the question is N/A for any military retiree. Will try again later this month. 

[BigChief7102]

Okay, well, the response from TurboTax WEEKS ago was, "The IRS isn't taking returns until February 12th, so keep checking back." Well, it's February 15th now, and this online filing software issue STILL isn't fixed. I've been using TurboTax for the last 5 years. Some IT fool has apparently made changes to their software within the last year and screwed everything up for military retirees. I'm moving on to a different online tax filing service!

[turbogreg1]

@BigChief7102 check your answers. They fixed it and I filed already. Military retirement should have a 7 in box 7 of your 1099 and retirement is a non-qualified plan. I forgot what they changed the question too, but I no longer had to lie about “did I get any of this money before I turned 59.5”. I was able to answer yes (I turned 60 last August) without a big tax hit. So in the end, it looks like it was fixed. Check again and good luck.