topic Early distribution from a 401k that the software says avoids the 10% Penalty as it was due to COVID, yet the software is still assessing us a 10% Early Withdrawal Penalty in Retirement tax questions

Early distribution from a 401k that the software says avoids the 10% Penalty as it was due to COVID, yet the software is still assessing us a 10% Early Withdrawal Penalty

kyleodell33 — Sat, 06 Mar 2021 16:12:44 GMT

It says, "You're eligible for the COVID-19 exception" after I answer the questions related to COVID but it still assesses the penalty. Do I need to enter the distribution amount under "Other Reason" when asked "These Situations May Lower Your Tax Bill"?

Re: Early distribution from a 401k that the software says avoids the 10% Penalty as it was due to COVID, yet the software is still assessing us a 10% Early Withdrawal Penalty

DoninGA — Sat, 06 Mar 2021 16:13:58 GMT

What is the code entered in box 7 of the Form 1099-R? This may be an issue when using the TurboTax online editions.

Re: Early distribution from a 401k that the software says avoids the 10% Penalty as it was due to COVID, yet the software is still assessing us a 10% Early Withdrawal Penalty

kyleodell33 — Sat, 06 Mar 2021 17:03:56 GMT

The code is L1. It was a loan on the 401k that we did not pay back when my wife stopped working.

Re: Early distribution from a 401k that the software says avoids the 10% Penalty as it was due to COVID, yet the software is still assessing us a 10% Early Withdrawal Penalty

DoninGA — Sat, 06 Mar 2021 17:12:34 GMT

@kyleodell33 wrote:

The code is L1. It was a loan on the 401k that we did not pay back when my wife stopped working.

After entering the Form 1099-R and going through all the questions you will land on a screen that states These Situations May Lower Your Tax Bill, enter the amount of the distribution in the box labeled Other Reason

The 10% early withdrawal penalty will be removed.