Question

How do I enter an exception on early distribution for permanently disabled veteran from retirement plan? Should it prompt me to fill out a Form 5329 for the exception?

Forum|Forum|7 years ago
June 3, 2019
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TurboTax Deluxe Online

Employee

It depends on the code in box 7 of the 1099-R. But regardless, you enter the 1099-R exactly as printed. Then pay attention to the screens that will follow, as you will be presented with situations that qualify for an exception.
Understand that you *WILL* pay tax on the money. However, if it's an early withdrawal, your exception qualification will be for the 10% early withdrawal penalty.

B

BillM223

You need to enter the 1099-R. I assume that it has a distribution code of '1' (it probably should or you're not likely to have the early distribution penalty)?

Go through the entire process of entering the 1099-R. Towards the end of the individual 1099-R interview, you should probably see a screen that says "About the money that [name] took out of this account". On this screen, you will be given a heads-up that says "Don't worry...we'll help you check for exceptions to this tax".

The only problem is that the screen that does this is loooong after this point. In fact, it is after you finish with all the 1099-Rs and hit continue. Keep going and eventually you will see a screen that says "Let's see if we can reduce your early withdrawal penalty". Hit continue, click on the type of plan, and then you are given the chance to enter the amount of the distribution that was due to disability.

This will populate form 5329 for you.

Just have patience, the screen will present itself eventually.

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