Cannot find "Emergency Personal Expense" 1099-R exception in online tool

[MissingMyForm]

My bank's 1099-R form used code "J" for "Early distribution from a Roth IRA, no known exception." As far as I can tell, TurboTax is not offering me the option to include a Form 5329 to state that the exception is a $1,000 emergency personal expense distribution. This exception has been permitted in tax law since 2024.

I talked to my bank and they said this needs to be clarified by my tax preparer, and not Form 1099-R. As far as I can tell in my research, they are correct: They were supposed to use Code J, and I am supposed to file a Form 5329 and list exception number 23 on Line 2 (See: https://www.irs.gov/instructions/i5329).

How do I get Form 5329 included before I file, so that I don't get a 10% early distribution penalty? Thank you!

[ThomasM125]

You should be allowed the penalty exemption for emergency expenses. I noticed when I edited a Form 1099-R entry in TurboTax I did not get the option to exempt the distribution from penalty, as I did not get the screen that says These situations may lower your tax bill. However, when I entered a new Form 1099-R I did see the option. I suggest you delete the entry you made and re-enter it. You have to answer several question regarding IRA balances and prior year contributions. You should pay close attention to what is being asked so you answer them correctly. Also, you need to enter your emergency expense amount on the bottom of the page that says These situations may lower your tax bill, so you may need to scroll down to see the option. 

You can follow these steps to delete the Form 1099-R that you entered so you can enter a new one:

1. Choose the Tax Tools option on your left menu bar while working on your return

2. Choose Tools

3. Choose the Delete a form option under Other Helpful links 

4. Find the Form 1099-R in the list and delete it

[MissingMyForm]

Thanks for answering. I gave this a try, but it still did not provide an emergency exception option. There were several questions as you mentioned but the only exceptions suggested by the questions were: 

-Qualified disaster

-Inherited IRA

-IRA rollover

-First-time home purchase

I answered the questions truthfully and did not receive a Form 5329

[MissingMyForm]

Update: It's possible that TurboTax did not offer this exception because my retirement account is a Roth IRA and I have not exceeded my contributions total in terms of withdrawals yet. I will proceed with filing and hope that I do not receive a penalty.

[ThomasM125]

That would mean you didn't have any taxable income from the IRA distribution, as the penalty would be assessed on the taxable portion of the distribution. You can look on line 4(b) of your Form 1040 to see if any of your distribution is showing as taxable. Also, when I tried to go back in to trouble shoot, again I couldn't get the penalty abatement screen to populate. I had to start a new return to get it to work for some reason.

To view your form 1040 and schedule 1 to 3:

1. Choose Tax Tools from your left menu bar in TurboTax Online while working in your program
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done

If you had a penalty for early withdrawal of IRA funds, it would show on line 8 on Part II of Schedule 2.