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It sounds like the 1099-R may have been coded 1 in Box 7- Early distribution, no known exceptions.  If that is correct, the 10% penalty applies.  If it is not correct, and the conversion occurred AFTER she turned 59.5 in June, you should ask for a corrected 1099-R, with Code 7 in Box 7. If they refuse, adjust it yourself, then after entering the 1099-R check the box next to I need to file a substitute 1099-R and complete the interview questions. When you change from code 1 to 7, you'll also get  a question to check if you did withdraw the money early.