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owenguhru
New Member

We rolled out a 401k, wife has applied for permanent disability, it appears that may reduce or eliminate the early withdrawal penalty, but how do I pursue that option on my tax filing??

 
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Fern
New Member

We rolled out a 401k, wife has applied for permanent disability, it appears that may reduce or eliminate the early withdrawal penalty, but how do I pursue that option on my tax filing??

The requirements to use the disability exclusion include:

You must be disabled and the distribution must come from your own account. You cannot use another family member’s disability to claim the exception for distributions from your own retirement account. This means that if your wife is disabled, the funds must have come from her account.

You must be unable to do any work and the disability is going to be of an indefinite duration or is likely to result in death. If you can still work in some “substantially gainful” way, you aren’t disabled enough, per the tax code, to claim the disability exception.

If you meet the requirements, in Turbo Tax, after you have entered all of your 1099 R forms, there are a series of questions asked to determine if you owe a penalty tax on an early withdrawal from a retirement account. Note that the penalty exclusion list is different for pension plans, 401ks and annuities than it is for IRAs.

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