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[USA] [401K] I was in a settlement for a class action lawsuit involving a 401k. I just received a 1099r. Box 7 has code "7"; I am under the age to withdraw without penalty. Will i receive a penalty? (lemmy.world)

submitted 9 months ago by acetanilide@lemmy.world to c/personalfinance@lemmy.ml

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Sorry for long title:

USA
in a state with no state income tax
my former employer (international corporation) messed up 401ks, resulting in class action lawsuit
settlement gave claimants <$20 each
just received a 1099r for this amount
box 7 = "7", which means normal distribution per IRS
I am under 59.5

I don't understand the table on the IRS website. Just wondering if there will be a penalty for this settlement "distribution" or if it is waived since it was part of a lawsuit. I usually do my taxes by myself so I don't have anyone to ask.

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[–] PrinceWith999Enemies@lemmy.world 8 points 9 months ago (1 children)

Is it $20 or $20k?

I’m pretty sure the penalty on withdrawal is a percentage of the amount withdrawn, so if you’re using tax prep software I’d just enter it as written and see how much it changes your taxes. It’s probably not even going to be a rounding error compared to your overall tax bill.

[–] acetanilide@lemmy.world 4 points 9 months ago (1 children)

Makes sense.

It's $20 (well less than that actually lol. Might go to McDonald's)

[–] dohpaz42@lemmy.world 11 points 9 months ago

They screw up your 401k, probably to the tune of millions, and you get McD’s out of it. God bless America. 🫡