A client divorced her husband in 2012 and received 1/2 of his 401k $30000. She received a 1099-R with distribution code 2. Does she has to pay 10% penalty? If not, what code do you put in form 5329 for exemption of penalty?
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No need for a 5329. Code 2 means early distribution, exception applies. So, the IRS knows there is no penalty.You have the right to remain silent. Anything you say will be misquoted, then used against you. -
HAH! IRS knows, do they? well, I guess we may assume so, until the cp2000 letter comes.Originally posted by WhiteOleander View PostChEAr$,
Harlan Lunsford, EA n LAComment
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Penalty exempt if issued under a qualified court issued QUADRO. If you want a cite you will have to do the research yourself.Originally posted by awesome View PostComment
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Look on pages 12-11 and 13-3 of The Tax Book for 2011 for your answersOriginally posted by awesome View Post"The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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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
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Very clearly and succintly stated and supported, of course, by code.Originally posted by Matt Sova View PostEAnOKComment
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