Form 1099-R - Early Distribution Exceptions

Generally, if you are under age 59 1/2, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your traditional IRA. Distributions before you are age 59 1/2 are called Early Distributions.

The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.

Exceptions to this rule are outlined in the IRS Instructions for Form 5329 Additional Taxes on Qualified Plans (Including IRAs and Other Tax-Favored Accounts), page 4:

    # - Exception Description

  1. Qualified retirement plan distributions (doesn’t apply to IRAs) you receive after separation from service when the separation from service occurs in or after the year you reach age 55 (age 50 for qualified public safety employees).
  2. Distributions made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from an employer plan, payments must begin after separation from service).
  3. Distributions due to total and permanent disability. You are considered disabled if you can furnish proof that you can’t do any substantial gainful activity because of your physical or mental condition. A medical determination that your condition can be expected to result in death or to be of long, continued, and indefinite duration must be made.
  4. Distributions due to death (doesn’t apply to modified endowment contracts).
  5. Qualified retirement plan distributions up to the amount you paid for unreimbursed medical expenses during the year minus 10% of your adjusted gross income (AGI) for the year.
  6. Qualified retirement plan distributions made to an alternate payee under a qualified domestic relations order (doesn’t apply to IRAs).
  7. IRA distributions made to certain unemployed individuals for health insurance premiums.
  8. IRA distributions made for qualified higher education expenses. 
  9. IRA distributions made for the purchase of a first home, up to $10,000.
  10. Qualified retirement plan distributions made due to an IRS levy.
  11. Qualified distributions to reservists while serving on active duty for at least 180 days.
  12. Other (see Other next). Also, enter this code if more than one exception applies.

To enter the exception amount and code for your situation in the TaxAct® program (after entering the Form 1099-R distribution information):

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
  2. Click Retirement Plan Income in the Federal Quick Q&A Topics menu to expand the category and then click on either the Taxpayer or Spouse copy of Additional taxes on qualified plans (Form 5329)
  3. If previous entries have caused an additional tax to be calculated for the return, you will see that amount on the screen titled Additional Tax - On Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
  4. Click Review to the right of the additional tax that was calculated and proceed through the section where you will be able to enter the Exception Code and Exception Amount as appropriate

Additional Information