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Visitor I

10% Penalty for Early IRA Withdrawal not being assessed on TurboTax

I am 40 years old & had a total distribution of my one and  only traditional IRA. I funded the IRA with nondeductible contributions & since they were greater than my distribution amount, I had a loss & am not subject to paying income tax on the distribution. The loss on my investment falls under Miscellaneous Deductions on Schedule A.   So far, so good - I agree

 

My question is: TurboTax is not assessing me the early 10% withdrawal penalty on Line 59 on the 1040 - is this correct?  Does it have something to do with the fact that I had a basis in the IRA?  I have researched and wasn't able to find anything on point with my situation...I just assumed that I would be subject to the penalty...please advise if TurboTax is correct

 

1 Comment
TurboTax Specialist

10% Penalty for Early IRA Withdrawal not being assessed on TurboTax

The early withdrawal penalty applies only to the taxable portion of your early withdrawal. Since nondeductible contributions didn't get you a deduction when you made the contribution, you don't have to pay the early withdrawal penalty on that portion of the withdrawal. If your entire withdrawal consists of only nondeductible contributions, you won't owe any early withdrawal penalties.