Interestingly, Turbotax will cause you to make an error in some cases. If you indicate that you have made an early withdrawal, it looks for ways to reduce the tax bill. One option it allows you to specify is "Separation from service the year during or after age 55". If you choose this, it eliminates the 10% penalty. That should not be allowed if the withdrawal was from a previous employer, but Turbotax doesn't ask whether it's the current or a former employer.
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