Case Study 2: Penalty on Early Withdrawal of Savings
Trudy has one Form W-2 and one Form 1099-INT and no other income. Her Form 1099-INT shows both interest income and an early withdrawal penalty. Trudy does not pay alimony, and she did not make a contribution to a traditional IRA.
Trudy can claim the adjustment for the penalty on early withdrawal of savings on Form 1040.
The early withdrawal penalty amount should be entered in the interest income section if it is listed on Form 1099-INT. Otherwise, go to the Deductions section, then Adjustments, and click begin on the Penalty on Early Withdrawal of Savings or CD line in the software.