When do I Pay a Penalty on 401 k Withdrawals? AARP Tax Aide Program
When do I Pay a Penalty on 401 k Withdrawals : AARP Tax-Aide Program
A: As you separated from employment and are at least age 55, you are exempt from the 10 percent early-withdrawal penalty. Your former employer should record a Code 2 (Known Exception Exists) in Box 7 of the 1099-R that will be sent to you. If there is some other code in that box, then you will have to complete IRS Form 5329 and write Code 01 on Line 2 of that form.
These questions are actual inquiries submitted by taxpayers to our AARP Tax-Aide Program. The AARP Tax-Aide Program is a volunteer-run, free tax-preparation and assistance program offered to low- and middle-income taxpayers with special attention to those age 60 and older. Our volunteers are trained and IRS-certified to understand individual federal-tax issues. Our volunteers provide tax assistance as a public service and cannot guarantee the accuracy of the information provided. Cancel You are leaving AARP.org and going to the website of our trusted provider. The provider’s terms, conditions and policies apply. Please return to AARP.org to learn more about other benefits. Your email address is now confirmed. You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age. You can also by updating your account at anytime. You will be asked to register or log in. Cancel Offer Details Disclosures
When do I Pay a Penalty on 401 k Withdrawals
Q: I was recently laid off and withdrew my 401(k) balance to live on. Do I have to pay a penalty for early withdrawal? I am 58 years old.A: As you separated from employment and are at least age 55, you are exempt from the 10 percent early-withdrawal penalty. Your former employer should record a Code 2 (Known Exception Exists) in Box 7 of the 1099-R that will be sent to you. If there is some other code in that box, then you will have to complete IRS Form 5329 and write Code 01 on Line 2 of that form.
These questions are actual inquiries submitted by taxpayers to our AARP Tax-Aide Program. The AARP Tax-Aide Program is a volunteer-run, free tax-preparation and assistance program offered to low- and middle-income taxpayers with special attention to those age 60 and older. Our volunteers are trained and IRS-certified to understand individual federal-tax issues. Our volunteers provide tax assistance as a public service and cannot guarantee the accuracy of the information provided. Cancel You are leaving AARP.org and going to the website of our trusted provider. The provider’s terms, conditions and policies apply. Please return to AARP.org to learn more about other benefits. Your email address is now confirmed. You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age. You can also by updating your account at anytime. You will be asked to register or log in. Cancel Offer Details Disclosures