Code 1 on 1099-R, yet distribution for Higher Education Expense/Personal Emergency Expense

[eohiri]

Hi, I made an early withdrawal from a retirement account in order to help cover expenses due to the financial burden of higher education and other life expenses. My tax agent says I have no distribution exception, but my understanding is that early distribution penalties are waived in my situation. What do I do? What do I tell my agent to account for my exemption?

[MaryK4]

Please refer to this document and ask them to review the Internal Revenue Code sections that apply.  Retirement topics - Exceptions to tax on early distributions.

[VolvoGirl]

What kind of account?  Was it a 401K account?  That might only be a penalty exception for IRA accounts.

Retirement penalty exceptions

https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/exceptions-penalty-e...

[DawnC]

TurboTax will ask about qualifying situations to reduce your early withdraw penalty if one is applied.   See this IRS chart for exceptions to the early distribution penalty.    The following exceptions are allowed for a 401K or IRA distribution:

• one distribution per calendar year for personal or family emergency expenses, up to the lesser of $1,000 or vested account balance over $1,000 (made after 12/31/2023)
• up to $22,000 to qualified individuals who sustain an economic loss by reason of a federally declared disaster where they live
• after participant/IRA owner reaches age 59½
• amount of unreimbursed medical expenses (>7.5% AGI)

The exception for higher education expenses is only allowed for IRA accounts, not your 401k.  

[eohiri]

Thank you for the link. The account was an IRA.

[VolvoGirl]

Make sure you check the little IRA box between boxes 7&8 (if it is checked).  After you enter the 1099R it will ask if you have an exception.  It may be later at the end of Deductions.