The IRS recently conducted a project to review the taxable distributions from IRAs and qualified retirement plans reported on Form 1099-R (Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc.). In its review, the IRS looked at whether individuals reported the amounts marked as “Early distribution, no known exception” (box 7, code 1) as taxable distributions and whether the additional 10% early distribution tax under IRC Sec. 72(t) was included. The IRS found that almost 40% of the individuals made errors on their Form 1040 tax returns and most didn’t qualify for the exception to the 10% early withdrawal penalty. The IRS provides a helpful chart listing the various exceptions to the 10% penalty at http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics—Tax-on-Early-Distributions