Paying IRS Levy with IRA draw

Enter the Form 1099-R.  In the follow on questions after the form has been entered you will be asked about any exceptions to the early distribution penalty.

 

To enter, edit or delete a form 1099-R -

Click on Federal Taxes (Personal using Home and Business)
Click on Wages and Income (Personal Income using Home and Business)
Click on I'll choose what I work on (if shown)
Scroll down to Retirement Plans and Social Security
On IRA, 401(k), Pension Plan Withdrawals (1099-R), click the start or update button

 

Or enter 1099-r in the Search box located in the upper right of the program screen. Click on Jump to 1099-R

After you enter the distribution information from your 1099-R form, TurboTax will have subsequent questions so you can indicate the the distribution was used to pay an IRS levy.

 

1. On the Let's see if we can reduce your early withdrawal penalty screen, select Continue.
2. On the Identify the Plan screen, select IRA and Continue.
3. On the Did you use your IRA to pay for any of these expenses? screen, scroll down to IRS levy, enter the amount and Continue.
4. You should get a message Looks like your early withdrawal is tax free. Select Continue.

Unless you qualify for an exception, you’ll pay a 10% additional tax penalty on the taxable amount of early distributions from an IRA (traditional or Roth) before reaching age 59 1/2.

 

There are exceptions to the 10% tax penalty for early distributions:

• Death or total and permanent disability
• Series of substantially equal periodic payments based on life expectancy
• Qualified first-time homebuyer distributions up to $10,000
• Qualified higher-education expenses
• Certain medical insurance premiums paid while unemployed
• Unreimbursed medical expenses that are more than a certain amount of your adjusted gross income
• IRS levy
• Certain distributions to qualified military reservists called to active duty
• Beneficiary of a deceased IRA Owner
• Qualified Birth or Adoption costs