Is the code in box 7 a 2? There is an exception to the 10% penalty if the employee separates from service during or after the year the employee reaches age 55 (age 50 for public safety employees of a state, or political subdivision of a state, in a governmental defined benefit plan). The definition of Public Service officer recently expanded to include specified federal law enforcement officers, customs and border protection officers, federal firefighters and air traffic controllers.
In TurboTax, there is a section to indicate you are not subject to the penalty. This is after you have entered all your 1099R information and continue through. Make sure you indicate benefits are from a qualified plan. Enter the amount form box 2a on the line for separation of service at 55.
