Your Life

Your Life

Major life milestones often have a major tax impact. Changes in your marital status, having a baby or adopting a child can have significant impact on your taxes. This is the place to ask questions about dependents, real estate, and other various scenarios that play a significant role in what taxes you pay.

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Pioneer
Posts: 1
Registered: ‎04-16-2018

Early retirement withdrawal exception code error

Hello, 

 

I can't seem to fix an issue on my own. Help? 

 

I took a withdrawal from a retirement account when I left a job. I used a portion for medical expenses. Here are the numbers: 

 

Withdrawal total: $35,781

Income: $94636 + $19,133 from consulting work (however I had a ton of deductions for home business, so not sure how much of that income counts)

Medical expenses: $12,255

 

Do I qualify for the exemptions?

 

Thanks so much!

 

 

Council Member
Posts: 516
Registered: ‎04-06-2016

Re: Early retirement withdrawal exception code error

You'd need to know your AGI which will include your net income from consulting work (income-expenses). The amount of your early distribution used for medical expenses that would not be subject to the early withdrawal penalty would be for the amount of medical expenses over 7.5% of your AGI. <https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...>

 

If you determine that you have medical expenses over that limit, you can enter your medical expense exemption into the online program here:

Federal>Taxes> "Yes" to add additional info > Retirement and Investments> visit Retirement plan, IRA, and other plan penalties

 

On the next screen: 

If any of these situations applies to you, we’ll help you include them on your return:

Choose Add item.

 

Check the box for: I took money out of a retirement plan, IRA, annuity, or endowment contract before age 59 1/2, but might qualify for an exception to the penalty. What does this mean?

 

On the next screen you'll enter the amount that qualifies for the exclusion (the amount that's more than 7.5% of your AGI) in the box and then choose the 5-Medical expenses more than 7.5% of AGI option in the drop down list for "Reason penalty doesn’t apply."

 

Then continue.

 

Karen