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.

Per IRS Instructions for Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, page 4:

Exceptions to the Additional Tax on Early Distributions

No. Exception
01 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). For distributions to qualified public safety employees on or after December 30, 2022, include distributions to employees with 25 years of service with the plan, distributions to firefighters covered by private sector retirement plans, and distributions to those employees who provide services as a corrections officer or as a forensic security employee, providing for the care, custody, and control of forensic patients, who meet the age requirement above.
02 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). Distributions received as periodic payments on or after December 29, 2022, will not fail to be treated as substantially equal merely because they are received as an annuity.
03 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.
04 4 Distributions due to death (doesn’t apply to modified endowment contracts).
05 Qualified retirement plan distributions up to the amount you paid for unreimbursed medical expenses during the year minus 7.5% of your adjusted gross income (AGI) for the year.
06 Qualified retirement plan distributions made to an alternate payee under a qualified domestic relations order (doesn’t apply to IRAs).
07 IRA distributions made to certain unemployed individuals for health insurance premiums.
08 IRA distributions made for qualified higher education expenses.
09 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 Distributions incorrectly indicated as early distributions by code 1, J, or S in box 7 of Form 1099-R. Include on line 2 the amount you received when you were age 591/2 or older
13 Distributions from a section 457 plan, which aren’t from a rollover from a qualified retirement plan.
14 Distributions from a plan maintained by an employer if: 1. You separated from service by March 1, 1986; 2. As of March 1, 1986, your entire interest was in pay status under a written election that provides a specific schedule for the distribution of your entire interest; and 3. The distribution is actually being made under the written election.
15 Distributions that are dividends paid with respect to stock described in section 404(k).
16 Distributions from annuity contracts to the extent that the distributions are allocable to the investment in the contract before August 14, 1982. For additional exceptions that apply to annuities, see Tax on Early Distributions under Special Additional Taxes in Pub. 575.
17 Distributions that are phased retirement annuity payments made to federal employees. See Pub. 721 for more information on the phased retirement program.
18 Permissible withdrawals under section 414(w).
19 Qualified birth or adoption distributions. Attach a statement that provides the name, age, and TIN of the child or eligible adoptee.
20 Distributions due to terminal illness made on or after December 30, 2022. Distributions that are made after the date on which your physician has certified that you have an illness or physical condition that can reasonably be expected to result in death in 84 months or less after the date of the certification.
21 Corrective distributions made on or after December 29, 2022, the income on excess contributions distributed before the due date of the tax return (including extensions).
99 Enter this code if more than one exception applies.

After you report Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. in the TaxAct program, you can enter the exception amount and code for your situation.

To enter the exception amount and code in the TaxAct program (if you need help accessing Form 5329, go to our Form 5329 - Entering in Program FAQ)

  1. From within your Form 5329, on the screen titled Additional Tax - On Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, click Review next to Early distributions from a retirement plan.
  2. On the screen titled Additional Tax - On Early Distributions, click the Exception code dropdown and click a code.
  3. Click the data entry field below Exception amount, and type the amount.

Note. 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.

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