1099R code

[goodcat]

Client received form 1099R with following info: Distribution Box 1 $150,000. Box 2 Taxable $150,000. Code Box #2.
No other explanation of code. IRS states all taxable; Client states not taxable.

On back of 1099R code 2 states early dist, exemption applies (under age 591/2)

Do you go by what the 1099 R box 2 says (taxable) or is there some other exclusion to look for? Doesn't mention death exclusion anywhere.

[Burke]

Well, was the client over 59 1/2 when the distribution was made? Code 2 only means the distribution is not subject to penalty. Why does the TP think it is not taxable? If it was an IRA or 401k distribution, it is taxable.

[Roland Slugg]

If the taxpayer thinks the $150k is not taxable, the most likely reason is that he rolled it over ... hopefully within the 60-day time limit. Ask your client about that, and the matter should be easily resolved ... one way or the other.

As the above post correctly points out, Code 2 just means the amount that would normally be subject to the 10% §72(t) penalty is exempt from that penalty.

[JohnH]

Have you asked the client why he thinks it is not taxable?
If he knows it isn't taxable, he should also know why.

("I don't want to pay the tax" isn't a valid answer)