Can a retired public service employee (firefighter) withdraw money from an IRA prior to age 59 1/2 without paying a 10% penalty?

[kmiller680]

Do I have to fill out a special form to claim that I am a retired firefighter? 

[ScruffyCurmudgeon]

Several Federal Income Tax benefits available to public safety personnel.

1. Pension Protection Act of 2006, P.L. 109-280, Section 828:
Waiver of the 10% Early Withdrawal Penalty Tax on Distributions of Pension Plans
In general this covers all uniformed municipal or state [Federal was included in legislation last year] public safety officer - police, firefighter, EMT.
Age 50 instead of age 65 is the age at which there is no longer a 10% penalty for early withdrawals.

2. Pension Protection Act of 2006, P.L. 109-280, Section 845   Extended through 2016
Distributions from Government Retirement Plans for Health and L/T Care Insurance Premiums
Eligible retired public safety officers may exclude up to $3,000 for qualified health insurance premiums paid per year - requirement: premiums must be paid by the retirement plan directly to the insurance provider.

IRS Reference: http://www.irs.gov/publications/p575/ar02.html#en_US_2011_publink1000226714

+++>>> NOTE:  Various states may have additional tax benefits at the state level.

[dmertz]

These apply to distributions from the qualified retirement plan provided by the employer of the the public safety officer.  There is no equivalent exception for distributions from IRAs.  For IRAs, the age is always 59½.

[ScruffyCurmudgeon]

Yes, these provisions typically apply to Union pension plans such as from the IAFF or with  the municipalities acting as funding sources and being trustees.

[smannix]

Purchased the 2023 Intuit Turbotax Premier desktop version and am questioning whether the program is working correctly for police withdrawing pension funds earlier than age 59 1/2.  Seems like it is penalizing us with 10% for early withdrawal.

[MonikaK1]

TurboTax will determine whether an exception to the additional 10% tax applies based on the entry code in Box 7 of your Form 1099-R, and your answers to any applicable follow-up questions in the interview. 

See this help article for a complete list of the entry codes for Box 7. An early distribution might have one of these codes:

• 1 – Early distribution (except Roth), no known exception
• 2 – Early distribution (except Roth), exception applies

If your 1099-R had Code 1, TurboTax will ask follow-up questions to see if an exception applies.

One of the follow-up questions is, "Was (Name) Employed as a Public Safety Officer? Answer Yes if applicable. Answer the rest of the follow-up questions carefully in order for TurboTax to make the correct determination. If you aren't sure of the answers to some of the questions, contact the payer.