IRA disability

[bekzm]

A client is on disability with RR at young age this year 52. He rolled over into Fidelity his settlement several years ago into IRA. He has a traditional IRA and the rollover. He pulls out $2750 and it is from the traditional IRA code 1 and another $20098 from the rollover account and both of these are coded 1. He has another $9179 from the account of the rollover IRA and it is coded 3.

Question - why would the other 2 not be coded #3? Can we just take the exception on the 5329 and not tax him the 10% penalty since he is not working and on RR and the social security RR.?

The only problem is he already electronic filed and now it is time to pay and can't understand still why he subject to 10% penalty when he is on disability??

Any input on why we cannot do the amended and the 5329 and put the code for disability and not be subject to the 10%

Thanks

[Gretel]

The "Why" question is answered by everyone makes mistakes and maybe it is not a mistake after all. Depends on when TP became disabled. If you got distributions before he was disabled they would be subject to penalty.

[bekzm]

Disabled before

This is the 2nd year that I have done the return and he was hurt on the job with the RR and if remember right it was 5 years or so. Now he is pulling the money out - no job and sounds like high cost of living... so the question is still - the premature disability code 1 on couple of them and disability on others incorrect for the code 1?

[Gretel]

Yes, looks like code 1 is incorrect and you have the form ?? to remove automatic penalty.