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Level 2
posted Feb 2, 2023 6:57:03 AM

1099-R with incorrect IRS code from Fidelity

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?

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1 Best answer
Expert Alumni
Feb 2, 2023 7:12:28 AM

In TurboTax, please follow these steps:

 

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

 

2 Replies
Expert Alumni
Feb 2, 2023 7:12:28 AM

In TurboTax, please follow these steps:

 

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

 

Level 15
Feb 2, 2023 1:29:08 PM

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.