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bfosson83
New Member

TurboTax says I owe a "$295 penalty for taking an early withdrawal or making an excess contribution to an IRA or other tax-favored account." Why is this?

None of this happened at all in 2019.
1 Reply
KurtL1
Expert Alumni

TurboTax says I owe a "$295 penalty for taking an early withdrawal or making an excess contribution to an IRA or other tax-favored account." Why is this?

When you withdraw funds from your deferred income accounts such as an Individual Retirement Account (IRA) or your 401(k) and you are under the age of 59 1/2 you could be subject to a penalty. 

 

If you do not meet any of the Exceptions to Tax on Early Distributions you will pay a 10% penalty on the amount of the distribution

 

There is a maximum you you can contribute to your IRA during a tax year. In 2019 if you are under age 50 you can contribute up to $6,000. If you are 50 or older you can contribute up to $7,000. When the amount you contribute exceeds the maximum you will pay an excise penalty of 6% for each year the excess remains in the IRA.

 

The maximum you can contribute to your 401(k) in 2019 is $19,000. If you exceed the maximum you will pay an excise penalty of 6%.

 

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