AnnetteB6
Expert Alumni

Get your taxes done using TurboTax

Yes, that does make a difference.  Here is what probably happened:  

 

When your son left his job, the employer distributed his 401k to Principal.  That is what is indicated by distribution code 'G'.  It is telling you that the amount shown in box 1 was directly rolled over to another account.  Most likely the money went from the 401k to a Traditional IRA account managed by Principal.  When this Form 1099-R is entered into the return, it should not be taxable.  You will need to answer the questions about what happened to the money by saying it was NOT rolled into a Roth account.  The default then will be that it went into a Traditional IRA.

 

Then, the Form 1099-R from Principal with distribution code '1' indicates that it was an early distribution from a retirement account that is subject to the early distribution penalty and income tax.  The follow-up questions on this one are less complicated because you just answer that he did something else with the money (cashed it out).

 

To verify that this is the situation, take a look at any paperwork issued from the employer regarding the cash-out.  Also, take a closer look at any account statements from Principal.  They should indicate that the account is a Traditional IRA.  If they do not, that would be a question you could ask Principal to verify the situation a bit further.

 

@Sledhead70

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