Question

How do I get the penalty on an ira withdrawal to credit for for the year a child was born (secure act)

Forum|Forum|6 years ago
February 18, 2020
2 replies
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TurboTax Deluxe Online

You won't find the penalty exception for the first year a child was born or adopted in your 2019 tax return options.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, enacted Dec. 20 is effective for IRA distributions after 2019. So, that exception to the 10% early withdrawal penalty will be available on your 2020 tax return, for withdrawals made on or after January 1, 2020.

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D

daznad

That's what I was expecting yet that option wasn't available when I was just in turbotax trying to file my 2020 return. There is no exemption in the list related to child birth when I entered my 1099-R info.

CatinaT1

To enter the exception for the penalty, follow these steps:

Several questions after entering your 1099-R, you will get a screen that says: Let's see if we can reduce your early withdrawal penalty
Select Continue
Enter $5,000 in the area for Another reason, select Continue
The next screen should remove the penalty.

For the Qualified Birth or Adoption Distributions, the IRS requires you to attach a statement that provides the name, age, and tax id number of the child or eligible adoptee. Because of this requirement, you will need to paper file your return.

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S

shrodinbug

Hi,

I'm trying to file my 2021 taxes and I don't see any options described above to enter the exception. We had twins last year (in 2021) and so withdrew $10,000. We've added them onto our taxes (married, filed jointly) with ssn's, but after I enter the 1099R (it got imported) there's just a note that says "we'll check for exceptions later" but then it never happens. I'm using TT deluxe online. I went ahead an paid and can see the $1000 penalty is being added.

Also, please don't tell me we have to paper file because of this...

P.S. It appears that my financial institution entered a distribution code of 1 on the 1099R, but it looks like it maybe should be 2 because exceptions apply...so do we need to try to get them to fix it? If I just change it to 2 then the penalty does get removed, but...seems kind of dodgy to just do that.

JohnB5677

There is not an area in TurboTax to indicate an exception for the 10% penalty if Box 7 is coded with a (1). You are correct, by entering a (2) in Box 7 it will eliminate the 10% penalty.

There is no way to make this correction yourself. You must contact the issuing entity to get it changed,

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S

shrodinbug

I reached out to Vanguard and they said they couldn't make the change and that with TT I should be able to attach a form 5329 showing I qualify for the exemption. Not sure how to do that or if like you say it's even possible.

Thanks