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My wife and I took money out of our retirement accounts to pay for emergency repairs to our home in May of 2021. Unfortunately, we were not ordered to relocate or demolish, so it doesn't meet criteria of IRC 165. However, we also had a child in Aug of 2021, i.e. 4 months after the initial withdrawal. I understand in 2021 families were allowed to withdraw up to $5,000 per child per parent without penalty.

Is it possible to post-hoc request a separate 1099R or explain this situation in my tax return to avoid the additional 10% penalty on that portion of money we withdrew?

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  • I'd argue that is is reasonable to know 4 months before birth that you're going to have a child... Whether it's going to stand at audit is between you, your attorney/CPA and the Revenue Agent.
    – littleadv
    Commented Feb 25, 2022 at 23:43
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    What kind of "retirement account" is this?
    – user102008
    Commented Feb 26, 2022 at 6:00
  • @user102008 it's a traditional 401k, I've taken unpenalized deductions before and understand that the 20% withholding is mandatory and is taxed as income. There is the additional case of the 10% penalty however that I'm concerned about.
    – AdamO
    Commented Feb 27, 2022 at 0:12

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