1099R Code 7?

[Randall]

Client has 1099R (one each for each spouse) coded 7.  But they are under 59 and half.  It seems 10% penalty should apply.  Should I just include on 5329 or are there reasons the penalty might not apply to them.  Usually the financial institution would have this as code 1.

 

[Pacun]

If you are a firefighter or a tower controller in airport and you are over 50 years old, you don't pay the penalty. I think they are called "security personnel". See ILLMAS posting regarding "what my barber say".

If you are 55 years old and you quit your job or they fired you, then you don't pay the penalty. 55 years old AND you separate from your employer.

[Pacun]

10% Penalty Exception
•
Qualified public safety employees may take distributions from a benefit plan after separating from service at age 50
–
Without incurring additional 10% tax
(IRC § 72(t)(10))

COPIED FROM ILLMAS LINK ON ANOTHER POST.

[Randall]

Client states that that they were forced to choose from several options regarding a pension plan when company was sold.  Were told that the distribution was not subject to penalty and client verified with the pension custodian who issued the 1099R.  So I'll go with that and go with the code 7 on the 1099R.

 

[Hahn1040]

the key is that they are receiving a series of substantially equal payments over  their life expectancy or if joint beneficiaries over the joint life expediencies.

Lots of people retire before age 59 1/2.  

when paid as an annuity it is not premature;  a one-time distribution is premature (unless there is an exception)