1099-R with incorrect IRS code from Fidelity

Forum|Forum|3 years ago
February 2, 2023
1 reply
12 views

I was forced this past year to withdrawl my 401k funds from Fidelity, as did not meet the minimum amount required for the account. Taxes were withheld, which would be correct, but the 1099-R has code 1, when should have been code 3 for disability, which I have been on disability for several years.

I reached out to Fidelity and they will not correct the IRS code from 1 to 3.

Is there any way to get my taxes done, where I avoid paying the early distribution penalty, which is waived for disability?

Best answer by MinhT1

In TurboTax, please follow these steps:

After you have entered all your forms 1099-R, on the summary page Review your 1099-R Info, click Continue
Follow the interview until you arrive at the page titled Let's See If We can Lower your Tax bill and click Continue
Continue until you get to a page titled These Situations May Lower Your Tax Bill
Enter the amount of your distribution in the box next to Permanent Disability and click Continue
Your early withdrawal penalty will be waived.

MinhT1Answer

Level 15

In TurboTax, please follow these steps:

After you have entered all your forms 1099-R, on the summary page Review your 1099-R Info, click Continue
Follow the interview until you arrive at the page titled Let's See If We can Lower your Tax bill and click Continue
Continue until you get to a page titled These Situations May Lower Your Tax Bill
Enter the amount of your distribution in the box next to Permanent Disability and click Continue
Your early withdrawal penalty will be waived.

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dmertz

Level 15

Adding to the information that MinhT1 has provided, it's not Fidelity's responsibility to determine your disability status. That's between you and the IRS. This is why Fidelity uses code 1 and you must claim the exception yourself on Form 5329.