Taxpayer brought in information for review. She has little income but actually a complicated return.
She divorced many years ago and part of her settlement was retirement investments of her ex's that remained with his administrator but in her name. The total account was $70,000.
In 2008 her home was destroyed by fire so she took money out of the plan under hardship rules.
To begin with, I'm assuming part of the plan must have included ESOP because she received a 1099R with(numbers rounded):
Box 1 - $10,000 (Gross)
Box 2 - $ 8,500 (Taxable)
Box 6 - $ 1,500 (Net unrealized appreciation in employer's securities)
Box 7 - Code 2
She also received a 1099-B for for the stock that was sold for proceeds of $2,000.
A 2nd 1099R:
Box 1 - $60,000
Box 7 - Code G as she rolled it over into an IRA
She then took a withdrawal from the IRA with a 3rd 1099R:
Box 1 - $2,000
Box 2 - $2,000
Box 7 - Code 1 early distribution
She's only 49, so what exceptions to early distributions would apply to the original $10,000 distribution from the 401(k)? If it was originally transferred under a QDRO would this still allow for penalty free withdrawal many years later?
She divorced many years ago and part of her settlement was retirement investments of her ex's that remained with his administrator but in her name. The total account was $70,000.
In 2008 her home was destroyed by fire so she took money out of the plan under hardship rules.
To begin with, I'm assuming part of the plan must have included ESOP because she received a 1099R with(numbers rounded):
Box 1 - $10,000 (Gross)
Box 2 - $ 8,500 (Taxable)
Box 6 - $ 1,500 (Net unrealized appreciation in employer's securities)
Box 7 - Code 2
She also received a 1099-B for for the stock that was sold for proceeds of $2,000.
A 2nd 1099R:
Box 1 - $60,000
Box 7 - Code G as she rolled it over into an IRA
She then took a withdrawal from the IRA with a 3rd 1099R:
Box 1 - $2,000
Box 2 - $2,000
Box 7 - Code 1 early distribution
She's only 49, so what exceptions to early distributions would apply to the original $10,000 distribution from the 401(k)? If it was originally transferred under a QDRO would this still allow for penalty free withdrawal many years later?
Comment