Rule of 55, laid off and emptied accounts

Forum|Forum|1 year ago
March 18, 2025
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I was laid off from my job in 2024 at the age of 57. I was unemployed for 8 months and used up all of my unemployment.

I participated in a 401k and a Roth while I worked there.

I emptied both retirement accounts (paid some taxes on the 401k, none on the Roth).
I also have a personal IRA that I withdraw from also during my unemployment period.

My 1099 R, Box 7 code 1 (Early distribution (except Roth), no known exception)

Do I qualify for a penalty exception of any kind, including The Rule of 55?
Is my 1099 R Box 7 wrong?
If I do qualify, which of my 3 accounts would it apply to?

Best answer by dmertz

The age-55 exception does not apply to the distributions from the IRA, only to the taxable amount of the distributions from the traditional and Roth 401(k) accounts.

DawnC

Employee

See Separation of Service in this TurboTax FAQ. Enter all of your 1099-R form as is. After each one you will be asked follow-up questions that will cover the penalty exceptions.

How does a 1099-R affect my taxes?

IRS Tax Topic 558 - You won't have to pay the 10% early withdraw penalty. Distributions made to you after you separated from service with your employer after attainment of age 55 are exempt from the penalty.

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dmertzAnswer

Employee

The age-55 exception does not apply to the distributions from the IRA, only to the taxable amount of the distributions from the traditional and Roth 401(k) accounts.