The financial institution is not required to use code 2 instead of code 1. By using code 1, the financial institution is claiming no responsibility for ensuring that the distributions meet the 72(t) SEPP requirements, leaving that responsibility up to you by reporting on Form 5329. When after clicking the Continue button on the page that lists the Forms 1099-R that you have entered TurboTax offers to see if you have any situation qualifies for a penalty exception, simply enter the corresponding amount in the box provided for equal periodic payments.
