Question

Form 5329 - Hardship Exception

Accepted Answer

First, you need to enter the distribution on Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. in the TaxAct program (if you need help accessing Form 1099-R, go to our Form 1099-R - Entering Distributions from Retirement Plans FAQ):

From within your Form 1099-R, on the screen titled Form 1099-R Summary, click Continue to be taken through the additional tax interview screens for Form 5329 (if you don't see the screens for Form 5329, go to our Form 5329 - Entering in Program FAQ to access it in the TaxAct program).
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.
On the screen titled Additional Tax - On Early Distributions, click the Exception code dropdown and click the applicable code, then click the data entry field below Exception amount and type the amount.

Per IRS Instructions for Form 5329, page 4:

The additional tax on early distributions does not apply to the distributions described below.

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).
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).
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	Other (see Other next). Also, enter this code if more than one exception applies.

You can find additional information in the IRS Topic No. 558 Additional Tax on Early Distributions from Retirement Plans Other than IRAs and Retirement Plans FAQs regarding Hardship Distributions webpages.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.