Solved
I withdrew 45K from my 401K in 2017 and at age 56. I separated from service in 2018. Do I have to pay the 10% penalty on my 2017 taxes?
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Unfortunately the IRS only allows the exemption is the withdrawals are taken out after your separation from service.
The IRS rule is, that the IRS allows an exemption from the 10% penalty for withdrawals for the employee separates from service during or after the year the employee reaches age 55 (age 50 for public safety employees of a state, or political subdivision of a state, in a governmental defined benefit plan). The "during or after" relates to the age reached not when the withdrawal was made.
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