Hi Amy,
I didn't see my response to your message so I'm trying again.
I want to clear up any confusion I may have caused .
Beginning with the question about the nys 20k exemption .
I was older than 59 1/2 at the time I took the first of 2 withdrawals for the tax year 2024(the transaction took place in December 2023 however the company's cutoff period pushed payout to January of 2024) and i was over 60 at the time of the second withdrawal(different amount) in September of 2024.
The 1099 r i received showed a code of 7 in box 7 which i believe indicates a regular distribution.
I was advised fron turbo tax rep that the 20k exemption i was receiving on my nys filing it201 was in fact correct .
The problem I am having now is that someone posted that in order to be eligible, it would have to be considered a periodic distribution.
While the acct remains open(i did not do a lump sum payout to close) I am concerned now that it is not eligible as these were not specifically scheduled.
I did initiate a transaction on the acct in 2022 which is within 2 calender years , however the withdrawal in 2022 was done under the rule of 55(exception code 2 in box 7).
Your response said that if code 7 was in box 7 the exemption applies however it is the statement about periodic payments and the definition of that which is throwing me off now.
The second issue was regarding the need for a 5329 for my sister who was not age 55 at the time the company closed her 401k amd sent her a check. Her 1099 r showed a code 1 in box 7 which indicates she must pay the penalty.
A 5329 was not completed because the code is correct and there are no exceptions to be filed to change the penalty. I was advised by tax expert that in this scenario since the penalty code is correct and she will be paying, there was no need for the 5329. I confirmed that on irs website as well. Her taxes were filed and the summary showed the penalty assessed and her refund was reduced by the penalty amount .
Thank you for your time and help
