1099-R possible code error?

[Nelstax]

Hi everyone, once again I am asking for some assistance. New client came in with a tote bag full of receipts, nasty letters from the IRS for issues regarding tax years 2005 and 2006 still unresolved, and says she still hasn't filed her 2007 return. After reviewing the 2006 return
and documents received I found that a 1099-R from her IRA shows distribution code 1 when she has been retired as disabled since 1988. She has made several withdrawals in recent years and this code makes a huge difference in taxes owed due to the early withdrawal penalty. This could have been going on for quite a while. Please forgive my ignorance, I know I can file form 5329 but how can I determine if she is definitely qualified for code 3 so that an amended return can be done asap? I have tried many times but cannot get any response from the insurer issuing the documents. Does anyone have any ideas on this and what direction would be best? I truly appreciate this forum and the overwhelming amount of wisdom and experience that shows in your responses. Thank you!

[Larmil]

Hi everyone, once again I am asking for some assistance. New client came in with a tote bag full of receipts, nasty letters from the IRS for issues regarding tax years 2005 and 2006 still unresolved, and says she still hasn't filed her 2007 return. After reviewing the 2006 return
and documents received I found that a 1099-R from her IRA shows distribution code 1 when she has been retired as disabled since 1988. She has made several withdrawals in recent years and this code makes a huge difference in taxes owed due to the early withdrawal penalty. This could have been going on for quite a while. Please forgive my ignorance, I know I can file form 5329 but how can I determine if she is definitely qualified for code 3 so that an amended return can be done asap? I have tried many times but cannot get any response from the insurer issuing the documents. Does anyone have any ideas on this and what direction would be best? I truly appreciate this forum and the overwhelming amount of wisdom and experience that shows in your responses. Thank you!

I have had several similar cases. If she is drawing SS disability a letter from SS is proof. I have also used a doctor's statement that conforms to the statement in 1040 Sched R as proof. Whatever statement you use should indicate that the disability began prior to the distribution.

[Nelstax]

Thanks so much for the response. This woman has been seeing several physicians and receiving SS disability benefits for years. I should have no problem proving the disability.
Thank you!