Christian Posted March 16, 2021 Report Share Posted March 16, 2021 A client owing to the Covid pandemic had to withdraw funds from an IRA account before reaching 591/2 last year. The fiduciary assigned code 1 in box 7 of the form. I ask the client to discuss with the broker changing the code to 2 indicating the client qualified for an exception. They declined stating that her taxman could change it. I see no code number in the elaborated exceptions in the instructions only a notation under other which states "Distributions incorrectly indicated as early distributions by code 1, J, or S in box 7 of Form 1099-R. Include on line 2 the amount you received when you were 591/2 or older." This clearly will not qualify as an exception. Frankly I am stumped as to how I can assist my client in avoiding the 10% early withdrawal penalty. My reading of the fiduciary reporting obligations were that they were to accept a signed letter or statement from the client attesting to the need related to Covid 19 and issue the code 2 on the Form 1099-R indicating an exception applied. Does anyone have a solution to this one ? Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 16, 2021 Report Share Posted March 16, 2021 The use of a code "1" in box 7 does not preclude you from using any of the tax penalty exceptions. A code 1 is probably misused on tens of thousands of 1099 Rs every year! 3 Quote Link to comment Share on other sites More sharing options...
Rmm Posted March 16, 2021 Report Share Posted March 16, 2021 Aren't you supposed to use 8915-E and choose distribution due to coronavirus in order to waive the penalty? 3 Quote Link to comment Share on other sites More sharing options...
Slippery Pencil Posted March 16, 2021 Report Share Posted March 16, 2021 Check the Corona related box near the bottom of the 1099R input. That will put the amount on 8915-E and eliminate the penalty. The fiduciary probably coded it correctly. As far as it knew, there were no exceptions. If it wasn't covid related and an exception applied, fill out the 5329 and list the exception. 5 1 Quote Link to comment Share on other sites More sharing options...
Christian Posted March 16, 2021 Author Report Share Posted March 16, 2021 Looks like adding the Form 815E to her return will resolve this problem. I simply have not had the time to review this particular form. Many thanks. Quote Link to comment Share on other sites More sharing options...
TAXMAN Posted March 16, 2021 Report Share Posted March 16, 2021 Do we still have to attach the 8915-e form as a pdf to get it to efile? Quote Link to comment Share on other sites More sharing options...
Randall Posted March 17, 2021 Report Share Posted March 17, 2021 12 hours ago, TAXMAN said: Do we still have to attach the 8915-e form as a pdf to get it to efile? ATX seems to require it. It comes up red in the check list. Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 17, 2021 Report Share Posted March 17, 2021 13 hours ago, TAXMAN said: Do we still have to attach the 8915-e form as a pdf to get it to efile? Yes. I am asking my clients to sign it. When I remember and I sign it too as the preparer. Quote Link to comment Share on other sites More sharing options...
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