1099-r

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  • awesome
    Junior Member
    • Jan 2013
    • 3

    #1

    1099-r

    A client divorced her husband in 2012 and received 1/2 of his 401k $30000. She received a 1099-R with distribution code 2. Does she has to pay 10% penalty? If not, what code do you put in form 5329 for exemption of penalty?
  • WhiteOleander
    Senior Member
    • Jun 2005
    • 1370

    #2
    No need for a 5329. Code 2 means early distribution, exception applies. So, the IRS knows there is no penalty.
    You have the right to remain silent. Anything you say will be misquoted, then used against you.

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    • ChEAr$
      Senior Member
      • Dec 2005
      • 3872

      #3
      Originally posted by WhiteOleander
      No need for a 5329. Code 2 means early distribution, exception applies. So, the IRS knows there is no penalty.
      HAH! IRS knows, do they? well, I guess we may assume so, until the cp2000 letter comes.
      ChEAr$,
      Harlan Lunsford, EA n LA

      Comment

      • awesome
        Junior Member
        • Jan 2013
        • 3

        #4
        Originally posted by ChEAr$
        HAH! IRS knows, do they? well, I guess we may assume so, until the cp2000 letter comes.
        So, is it 10% penalty exempt? And why?

        Comment

        • jimmcg
          Senior Member
          • Aug 2005
          • 633

          #5
          Originally posted by awesome
          So, is it 10% penalty exempt? And why?
          Penalty exempt if issued under a qualified court issued QUADRO. If you want a cite you will have to do the research yourself.

          Comment

          • JoshinNC
            Senior Member
            • Feb 2006
            • 1180

            #6
            Yes

            Originally posted by awesome
            So, is it 10% penalty exempt? And why?
            Because the 1099-R says so. Any other questions?

            Comment

            • JohnH
              Senior Member
              • Apr 2007
              • 5339

              #7
              Originally posted by awesome
              So, is it 10% penalty exempt? And why?
              Look on pages 12-11 and 13-3 of The Tax Book for 2011 for your answers
              "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

              Comment

              • smithtax
                Senior Member
                • May 2012
                • 107

                #8
                Originally posted by jimmcg
                Penalty exempt if issued under a qualified court issued QUADRO. If you want a cite you will have to do the research yourself.
                IRC ยง72(t)(2)(C)
                EAnOK

                Comment

                • Matt Sova
                  Senior Member
                  • Jun 2005
                  • 645

                  #9
                  Qdro

                  A distribution via a QDRO (Qualified Domestic Relations Order) is subject to tax, but not the 10% penalty. It is part of the property settlement. If she had taken her share as a direct rollover into an IRA for herself and then taken the money out she would be subject to a penalty.

                  Because the 1099-R is coded 2 you do not have to put any reason why it is not subject to the 10% penalty. The IRS does receive a copy of the 1099-R and will clearly know that the exception applies. No CP-2000 will be issued.
                  I would put a favorite quote in here, but it would get me banned from the board.

                  Comment

                  • smithtax
                    Senior Member
                    • May 2012
                    • 107

                    #10
                    Originally posted by Matt Sova
                    A distribution via a QDRO (Qualified Domestic Relations Order) is subject to tax, but not the 10% penalty. It is part of the property settlement. If she had taken her share as a direct rollover into an IRA for herself and then taken the money out she would be subject to a penalty.

                    Because the 1099-R is coded 2 you do not have to put any reason why it is not subject to the 10% penalty. The IRS does receive a copy of the 1099-R and will clearly know that the exception applies. No CP-2000 will be issued.
                    Very clearly and succintly stated and supported, of course, by code.
                    EAnOK

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