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Code 1 on 1099-R Exceptions

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    Code 1 on 1099-R Exceptions

    Deceased 1/5/2019 took out what looks like all of his retirements in 2018. The biggest one he rolled over, the smallest was Coded J (will need to find out if the Roth was in for 5 years here, I think) and the middle one was Coded 1 as he was only 54 years old. Looking at the exceptions codes for additional tax on early distributions, 04 Distribution due to death. My question: is it possible to use that since he passed away 1/5/2019 even though it was requested in 2018. Thanks

    #2
    Originally posted by frankie123 View Post
    Deceased 1/5/2019 took out what looks like all of his retirements in 2018. and the middle one was Coded 1 as he was only 54 years old. Looking at the exceptions codes for additional tax on early distributions, 04 Distribution due to death. My question: is it possible to use that since he passed away 1/5/2019 even though it was requested in 2018. Thanks
    You lose on 2 factors. One the distribution was before death and the distribution was to the taxpayer.

    IRC 72(t) contains the exceptions to the 10% additional tax. In part:

    (A)
    In general
    Distributions which are—
    ….

    (ii) made to a beneficiary (or to the estate of the employee) on or after the death of the employee,

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      #3
      This is what I thought but wanted to run it by you folks just to make sure and of course was hoping I might be wrong since $6,000 isn't chump change and that is the 10% penalty.. At least he did have that W/H but of course they don't think about the Federal & State income tax on that money. I have had people say why am I having to pay this kind of tax they took it out. Yep sure did but it was only the penalty, sure you folks have had same thing. Thanks NY Enrolled Agent

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        #4
        Was his death the result of a total and permanent disability? If so, that may be an option.

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          #5
          Also if he had to pay medical expenses, he may be able to avoid penalty on the amount he can claim on Schedule A of 2018 return, if any.

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