Retirement at Age 55

You have to access Form 5329 to claim the exception. Continue in the interview section. You will encounter a screen that says, "These Situations May Lower your Tax Bill" and you can check the box for separation from service after age 55.

The payer should have reported these distributions with code 2 to indicate that you received the distribution after separating from service in or after the year you reached age 55, in which case TurboTax will automatically treat the distribution as not being subject to any early-distribution penalty.

If they instead reported the distributions with code 1, you'll need to claim this penalty exception yourself on Form 5329 line 2.  To do this in TurboTax, TurboTax, go to Other Tax Situations -> Additional Tax Payments -> Extra tax on early retirement withdrawals, indicate that the distribution is from a qualified retirement plan, then enter the amount in the box labeled "Separation From Service The Year During or After Age 55."  TurboTax will then report this amount on Form 5329 line 2 with code 01.

Thanks for the info. They did put a code 2 and I entered it, accordingly. I can only assume that TurboTax addressed it properly.

Thanks for the info. My employer marked it as distribution code 2, which should trigger TurboTax to automatically make it exempt from the 10% penalty.