Tax Prep by Deb Posted April 9, 2008 Report Share Posted April 9, 2008 I have a client whose home was foreclosed upon. Just prior to being evicted they cashed in their 401K plan and paid the mortgage to save the house. They had a 1099R showing the distribution coded 1. I also read some papers that was sent them explaining that in very limited situations the penalty could be abated. One on the reasons listed was severe financial distress. Has anyone heard about this? Is it true I can get the penalty abated for them and if so how? If shown on 5329 what code do I use? Any help will be greatly appreciated! Deb! Quote Link to comment Share on other sites More sharing options...
Pacun Posted April 10, 2008 Report Share Posted April 10, 2008 I have a client whose home was foreclosed upon. Just prior to being evicted they cashed in their 401K plan and paid the mortgage to save the house. They had a 1099R showing the distribution coded 1. I also read some papers that was sent them explaining that in very limited situations the penalty could be abated. One on the reasons listed was severe financial distress. Has anyone heard about this? Is it true I can get the penalty abated for them and if so how? If shown on 5329 what code do I use? Any help will be greatly appreciated! Deb! The exception for the penalty is to purchase your first home. In this case, they have to pay the penalty. Quote Link to comment Share on other sites More sharing options...
LindaB Posted April 10, 2008 Report Share Posted April 10, 2008 This might be what you're looking for, I didn't read it all: http://www.irs.gov/retirement/article/0,,id=162416,00.html Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted April 10, 2008 Author Report Share Posted April 10, 2008 This might be what you're looking for, I didn't read it all: http://www.irs.gov/retirement/article/0,,id=162416,00.html Thanks for the link! It was what I was looking for and pretty much confirmed my gut feeling, however it's always nice to have something printed out so that when you tell the client they owe lots of money, they can see for themselves why! Again thanks! Deb! Quote Link to comment Share on other sites More sharing options...
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