Can I claim exemption to the early withdrawal penalty?
If you took an early distribution during the tax year, then you are generally subject to an additional penalty. 1099-R's with a box 7 distribution code of 1 or J, will cause the program to automatically calculate the 10% early withdrawal penalty.
If you qualify for an exemption of this penalty, you should complete Part I of Form 5329.
Where do I claim the exemption on Form 5329?
To complete Form 5329 go to:
- Federal Section
- Other Taxes
- Additional Taxes on Qualified Plans and Other Accounts
SIMPLE Retirement Distributions that are not subject to 25% Tax: If your early distribution was from a SIMPLE IRA it may be subject to a 25% penalty rather than 10%. If you are claiming the exemption for a SIMPLE IRA, enter the amount here.
Early Distributions that are not subject to the 10% tax: For all other early distributions, enter the amount here.
Select the reason for exemption: Select the appropriate exemption reason from the drop down menu.