You may qualify for an exception to the penalty on an early withdrawal from your retirement plan if you used the distribution to pay for medical expenses. The exception applies only to those medical expenses that exceed 10% of your adjusted gross income (AGI) (or 7.5% if you were age 65 or over in 2016).
When you enter the
information from your 1099-R, we'll ask how you used the distribution and see if you qualify for an exception to the penalty (which is an additional 10% tax).
To enter your 1099-R in TurboTax:
- Continue
working on your return in TurboTax Online. (If your return isn't open,
you'll need to sign in, click Take me to my return, then
click Pick up where I left
off.)
- Click My Account (top right of your screen).
- Select Tools.
- In the
pop-up window, select Topic Search.
- In the
search bar, type 1099-r.
- In the
results box, highlight 1099-r, then click GO.
- You'll
land on the Your 1099-R page, which lists the different types of retirement plans, including 401(k)s. Scroll down and select Yes, then click Continue.
- Choose your bank or brokerage. Enter the name of your bank, then scroll down and click I'll type it it myself. (You also have the option to import this information if your bank is a TurboTax Import
Partner.)
-
Enter Your 1099-R, then click Continue.
-
About the Money You Took Out of This Account. Click Continue.
- Continue answering the onscreen questions. When you get to the screen that asks What Did You Do With The Money from your bank?, select I did something else with it and click Continue.
- Continue to answer the onscreen questions. When you reach Your 1099-R Entries, click Continue.
- Let's See If We Can Lower Your Tax Bill. Click Continue.
-
Identify the Plan. For a 401(k), select Qualified retirement plan and click Continue.
-
These Situations May Lower Your Tax Bill. Enter your Medical Expenses and click Continue. (Click the screenshot below for reference.) TurboTax will determine if you qualify for an exception to the early distribution penalty.
For a list of
exceptions to the early withdrawal penalty, see page 4 of Instructions for Form 5329,
Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favor....
