Inherited 401k

[LCorryL]

I’m withdrawing money out of an inherited 401k. Will there be a place for that if I do my taxes on turbo tax online? 
How do I indicate it’s an inherited 401k to make sure I’m not paying penalties on it? 

[Joe_D-CPA-PFS-CFP]

Hello LCorryL,

Thanks for the question! When you receive the 1099-R for the distribution from the clearing firm of the broker that distributed the funds, the 1099-R will have a code in box 7 on the 1099 form. For an inherited retirement account, a Form 1099-R will typically report a "4," in box 7. If a "4" appears, it means you took a distribution from a tax-deferred retirement account and you are exempt from the early distribution penalty as the distributions were made after the original account holder's death.

When you are entering your income in TurboTax next year, you will enter or import the information from the 1099-R and TurboTax will see the Code 4 and know not to charge an early withdrawal penalty. Here is a link that describes the process in detail; Entering a 1099-R.

Please ask any follow questions if necessary.