Where to enter medical exemption for IRA early withdraw? Filing a joint return, is AGI used from both people to calculate the early withdraw penalty? Or individual?

[91bills]

When going through the 1099R questions, it didn't ask if it was used for medical. We are filing jointly, will that affect what % has the early withdraw penalty? Is there a way to see how much is getting penalized?

[AnnetteB6 · Accepted solution]

If there is an early withdrawal penalty assessed on an early distribution from an IRA, then the 10% penalty is only calculated based on the amount that was withdrawn.  It is not calculated based on any AGI or other income reported on your return.  

So, for example, if the distribution (or amount withdrawn) from the IRA was $10,000, then the maximum penalty would be $1000.  It could be less than $1000 depending on the circumstances.  

After you have entered the Form 1099-R reporting the early distribution, there should be a screen that shows you all of the possible exceptions to the penalty.  If the distribution is from an IRA, then out of pocket medical expenses that were more than 7.5% of your Adjusted Gross Income is one of the categories.  This means that if you had to pay enough medical expenses out of pocket that you exceeded 7.5% of your AGI, then that amount that was greater than 7.5% AGI can be excluded from the early distribution penalty.  

If you do not see that screen showing the exceptions, then you may not be subject to the early distribution penalty due to other circumstances (such as a distribution from a Roth IRA that is from your own contributions).

You can see the penalty that is being calculated by looking at your Form 1040 Schedule 2 line 8.  

To preview your Form 1040 using TurboTax Online, use the following steps while working in your tax return:

• In the navigation area on the left side of your screen, click Tax Tools to expand your choices
• Click Tools, which will open the Tool Center
• Click View Tax Summary under “Other Helpful Links…”
• Click  Preview My 1040 on the left side of your screen to see your actual tax form

If you are using one of the desktop versions of TurboTax, click the Forms button in the upper right corner of the screen to go to Forms Mode where you can view Form 1040 or any other form that is included as part of your return.  Once you are in Forms Mode, click the form name in the list on the left side of the screen.