Why does TT is assume my 1099-R is for an early withdrawl from an IRA instead for pension payments paid before 59 1/2? Rule of 55 Section 72(t) permits this w/o penalty.

[jgimpel1969]

I retired at 59 and started receiving pension payments. TT is saying "Let's check... did you withdraw this retirement money early? Early means withdrawing retirement money before turning 59 1/2. Early withdrawals like this are taxed an additional 10%." This is not true per rule of 55. Or is it thinking this is an IRA w/d?

[DoninGA]

What is the code in box 7 of the Form 1099-R?  Did you check the IRA/SEP/SIMPLE box on the 1099-R?

[ThomasM125]

I entered a pension distribution such as you mention in TurboTax and there was no penalty assessed for early withdrawal. I left the IRA box unchecked and used code "7" in box 7 indicating it was a normal distribution. Please let us know what you did that deviated from that so we can help you better.

[jgimpel1969]

Box 7 code is 7. SEP/Simple is UNchecked.

(The 1099-R actually doesn't even show that IRA/SEP/SIMPLE  field, oddly). 

[DoninGA · Accepted solution]

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@jgimpel1969 wrote:

Box 7 code is 7. SEP/Simple is UNchecked.

(The 1099-R actually doesn't even show that IRA/SEP/SIMPLE  field, oddly). 

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If you separated from your company at age 55 or older and you are under the age of 59 1/2 in 2024 then the plan administrator should have entered in box 7 a code of 2—Early distribution, exception applies (under age 59½).

[wood2]

I have the same problem, but the employer insists it is correct for them to enter a Box 7 code of "7" in the tax year you turn 59+1/2, and they will not issue a corrected 1099-R with a "2" code. All my prior 1099-R for previous tax years were code "2" but they changed to "7" this year when I turned 59+1/2. Any suggestions on how to fix this in TT?

[KrisD15]

Enter Form 1099-R

Code 7 in Box 7 is fine

IRA/SEP/SIMPLE unchecked is fine

Report that is was a "Qualified Plan"

Select "Yes, I got regular payments from this retirement account" and continue 

Continue through the interview and no penalty should be applied.

@jgimpel1969 

@wood2 

[jgimpel1969]

thanks.