1099-R w/distribution code of 1

[tacksman]

Client well over 59 1/2 years old received distribution w/code of 1. I know an age error can be "fixed" w/ exception code of 12 but ran into the use of the 1 code even if over 59 1/2 and certain conditions exist.

Cannot tell if in this case there is a birth date error in the file or if one of the other conditions exist. TP for his own reasons won't go back to former employer to resolve.

Has anyone run into any of these "other" reasons which utilize the 1 code?

[erchess]

Here goes

As I understand it, your client is over 59 and a half and separated from service, yet he received a F1099R with code 1 which IF I REMEMBER CORRECTLY indicates a premature distribution with no applicable exception known to the employer. The first thing to note is that as long as he is over 55 and separated from service there is no penalty.

What I would do is key the 1099 R in my software exactly as it is and then fill out the first three lines and the last line of F5329 with the taxable amount included in income (I am assuming you know how to calculate this but if not TTB has all you are likely to need to know.) the amount subject to penalty (zero) and the penalty twice (zero) and the appropriate code for the exception (1). When you do this you have admitted that the 1099R says what it says and taken the position that the Form is in error. It's actually not uncommon for these forms to be in error. Instruct your client to obtain a certified copy of his birth certificate and to scrounge around for whatever proof he has that he is separated from service and have both ready in case the IRS questions what you have done. I don't think they will question it but better safe than sorry.

[JG EA]

Just fill out 5329 with Code 12 on line 2 like you said. It apparently is a common mistake - see the instructions of this "other" category.

"Distributions incorrectly indicated as
early distributions by code 1"

[erchess]

Thank you JG

for correcting me. I made a mistake that might have led to an IRS letter that may be avoided by doing things per the instructions.