Retirement tax questions

@dmertz @DoninGA 

 

Here's a problem I am having.

 

On the 1099-R, the investment firm included code "01", "no exception" in Box 7 (Distribution Code).   This is their policy, because they do not "confirm" exceptions.  Even though the IRS provides an exception code, "2", the investment firm will not use it.  

 

So, when TT asks me for the code, presumably, I have to include "01" in the software, which immediately hits me with a $500 (10%) penalty.   If I include code 2 (which is not on the form), then the penalty is not charged.

 

* The investment firm will not provide a corrected form *.

 

Accordingly, what can I do?   Can I input the exception code ("2"), and "trust" the IRS to not penalize me?    Using the software, this is the only way I can see to avoid the penalty.   If I include 1, even if I attach a certification of the birth of the child, the software still includes a $500 penalty.

 

Again, I appreciate your help, but there seems to be a roadblock at every turn here.