Ah, good suggestion about changing the code 1 on the code 81 Form 1099-R! Assuming that box 2a is zero or blank, simply eliminating the code 1 will eliminate the penalty on the $5,500. You can either use code 2 in place of code 1 or simply remove the code 1, leaving only code 8. That's a much better workaround than any that I have suggested and permits e-filing. Because there is no tax withholding on the Form 1099-R, the IRS will be blind to the fact that you eliminated the code 1.
Leaving the code 81 Form 1099-R out entirely will produce an incorrect total on Form 1040 line 15a or Form 1040A line 11a, so that would not be a good workaround.
