topic Simple IRA withdrawal for higher education in Retirement tax questions

Simple IRA withdrawal for higher education

JonP1969 — Tue, 04 Feb 2025 21:21:48 GMT

I took an early withdrawal from a Simple IRA and entered 100% Higher Education. Turbo Tax is telling me I still have to pay the 10% penalty.... However, according my my research... Both traditional and Roth IRAs allow you to withdraw money for qualified higher education expenses before age 59.5 without incurring the 10 percent early withdrawal penalty

Re: Simple IRA withdrawal for higher education

ThomasM125 — Tue, 04 Feb 2025 21:41:42 GMT

It shouldn't be subject to penalty. I replicated your entry, using code 1 in box 7 and indicated that it was an IRA distribution and I wasn't subject to the penalty. It is possible you didn't check the box indicating it was an IRA distribution (next to box 7 on your Form 1099-R). If you didn't do that, it would not be exempt from penalty as it has to be an IRA distribution.

Re: Simple IRA withdrawal for higher education

JonP1969 — Wed, 05 Feb 2025 01:17:35 GMT

I double checked everything and it still says I owe 10%. I do have the box next to box 7 checked. This is really bad as I won't be able to use Turbo Tax if they're going to claim I owe an extra $912. I don't see what else I could possibly change... In the one large check box screen I choose "Simple IRA with more than 2 years of participation" as the only selection. Distribution code 1, box for IRA/SEP/SIMPLE checked. I then enter 100 in Higher Education.

Here's the full text, maybe I have a chance once I finish adding my data... Also, is there a way to manually override this $912 amount?

Good News: Your tax bill just got lower

For the info you just entered, we were able to reduce the tax...

Based on your entries so far, your extra tax bill is $912 or 10% (25% for Simple IRA) of the money you took out that didn't get used for a special situation. This number may change as you add more data to your return.

One last thing... right after Turbo Tax asks about this point, it asks if I took a previous Disaster Distribution before 2024. I did take a distribution during the 2020 covid emergency. Does that count? I answered yes. Not sure if that's complicating my 2024 Higher Education topic. I declared 1/3 of the 2020 distribution in 2021, 2022, and 2023, so it should have nothing to do with my 2024 Higher Education withdrawal.

Re: Simple IRA withdrawal for higher education

JonP1969 — Wed, 05 Feb 2025 01:22:00 GMT

Never mind - I figured it out. I entered 100 thinking it was 100% of my withdrawal. I needed to copy the full dollar amount over. Sorry about that. Thanks for the help. Once I fixed it, it said I owe no penalty.