IRA distribution was used for education expenses. There is no where to input that so Additional 10% Tax on IRAs is not added

[PatriciaV · Accepted solution]

The interview questions regarding exceptions to the penalty for an Early Withdrawal from an IRA appear after you have entered all Forms 1099-R. If you didn't see these questions, please review the coding on your 1099-R and the steps to report this in TurboTax.

Form 1099-R is entered under

1. Federal Taxes (Personal in Home & Business)
2. Wages & Income (Personal Income in Home & Business)
3. Retirement Plans and Social Security
   
4. IRA, 401(k), Pension Plan Withdrawals (1099-R)

(You can also find this by searching on "1099-r" and clicking the "jump to link" to go directly to the start of this topic.)

Check the code in Box 7 of your 1099-R: the code "1" for early distribution, no known exception will trigger the questions about how you used the distributed funds (see screenshot #1 below - click to enlarge). When you finish entering this 1099-MISC, you should see the page titled "About the Money You Took Out of This Account" (screenshot #2). Continue to the list of all 1099-R's.

When you are finished entering all 1099-R forms, click Continue. You should see the page titled "Let's See If We Can Lower Your Tax Bill" (screenshot #3). Continue until you see the page that asks you how you used the funds from your IRA (screenshot #4).

Enter the amount you used for education expenses in the related box and continue. The next screen should say "Good News..." This indicates that you are eligible to waive the 10% early withdrawal penalty.

[camille22]

When you say Enter the amount you used for education expenses in the related box and continue. why is education not listed? How do you go about getting this completed correctly?

About the Money You Took Out of This Account" (screenshot #2). Continue to the list of all 1099-R's.

When you are finished entering all 1099-R forms, click Continue. You should see the page titled "Let's See If We Can Lower Your Tax Bill" (screenshot #3). Continue until you see the page that asks you how you used the funds from your IRA (screenshot #4).

Enter the amount you used for education expenses in the related box and continue. The next screen should say "Good News..." This indicates that you are eligible to waive the 10% early withdrawal penalty.

[dmertz]

The education penalty exception only applies to distributions from IRAs.  If the distribution was not from an IRA, TurboTax will not offer you the opportunity to enter any amount for the education penalty exception.  A Form 1099-R reporting a distribution from an IRA that would be eligible for this penalty exception would have the IRA/SEP/SIMPLE box marked would have code J in box 7.  Distributions from a qualified retirement plan like a 401(k) do not qualify for this penalty exception.

[KasiaNora]

Ok, trying to do my taxes and have a 1099-R for our Roth IRA distribution which says in Box 2b "Taxable amount not determined" and Code "J" in Box 7.  No where am I being asked what we spent the withdrawal on.  All it asked was to confirm Box 2a "Taxable Amount" had no amount in it and then it exempted the amount from taxes.  From what I've read, it seems I should also be completing a Form 5329.  Help!!

[dmertz]

The question will only be asked if your Roth IRA distribution is subject to an early-distribution penalty because the distribution was more than your Roth IRA contribution basis.  If the distribution consists entirely of money you contributed, is not taxable or subject to early-distribution penalty, so there is no need for o ask what you did with the money.

Be sure to click the Continue button on the Your 1099-R Entries page and answer the general IRA follow-up questions so that TurboTax calculates the correct taxable amount and, if a portion of the distribution is subject to an early distribution penalty, you can enter the amount or education expenses that will provide an exception to the early-distribution penalty (but you'll still own any income tax).

KasiaNora, if TurboTax is not generating any Form 5329 after you enter the code J Form 1099-R, it seems that the distribution does not include any amount that is subject to an early-distribution penalty.  There is no need to apply a penalty exception to a nonexistent penalty.

[MihaiC]

Turbotax doesn't recognize my tuition expenses if you have option 2 in 1099R box 7. This is wrong.

It will ask for that only if option is 1

[dmertz]

If the Form 1099-R has code 2 in box 7, the distribution is already not subject to any early-distribution penalty so there is no need to claim the penalty exception for using the money to pay qualified education expenses.  Because there ne no need, TurboTax does not offer the option to claim any penalty exception.

[TheDarkSide]

So were you able to use TurboTax to account for the education exception?

[MinhT1]

@TheDarkSide

If you have qualified education expenses, your early IRA distribution is exempted from the 10% penalty up to the amount of these expenses.

Please read this TurboTax Help topic.

In TurboTax, please follow these steps:

1. After you have entered all your forms 1099-R, on the summary page Review your 1099-R Info, click Continue
2. Follow the interview until you arrive at the page titled Did you use your IRA to pay for any of these expenses?
3. Enter the amount of your education expenses in the box next to Higher education and click Continue
4. Your early withdrawal penalty will be waived.