Naomi is 40 years old. While she was employed, she cashed in her 401(k) and used the money to pay off debt. She does not qualify for any exception to the additional tax on early distributions. She received a Form 1099-R with a Gross Distribution in Box 1 of $5,000, taxable amount in Box 2a of $5,000, and a distribution code of 1 in Box 7. What is the amount of additional tax (i.e. early distribution penalty) that will be assessed and shown on the Form 1040 Schedule 2, Part II, line 8?

$500

$0

It depends on Naomi's other sources of income and which income tax bracket she falls within.

$5,000

$250