My son inherited part of a 401k from his aunt. He is required to take distributions for the entire amount within 10 years. He took his first distribution in 2024, with ni change to his tax bracket. The 1099-R indicated in Box 7, a code of "1." He is 21. The 10 year rule is going to force him to take the distributions before he ever hits 59 1/2. Is the 1099 form wrong in that code? Should it be a 2, giving him an exception? I switched them back and forth, and it does seem that the 2 is giving him the correct refund. The code of 1 seems to be tacking on the 10% early withdrawal penalty. Which code is correct? And am I understanding that he should NOT be paying the extra 10% for early withdrawal under 59 1/2?
