I received a 1099-R from my TDAmeritrade and I found out that box 7 distribution code is 2 instead of 1. I have not filed my income tax yet; so how do I correct this. I did contract TDAmeritrade two times and both times they refused to do the correction. They said that I have to contact tax advisor to handle that. Well, it is my fault because when I withdrew the money, I put distribution code 2 which I did not qualify for this code; so now I want to put code 1 so that I can pay the tax that I owned. I don't want to pay penalty later on.
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You will have to contact the payer on the Form 1099-R for a corrected form.
The form is sent by the Payer to you and to the IRS so the IRS expects to see the same tax data from the 1099-R on your tax return as they received.
I contacted TDAmeritrade two times and both times they refused to do correction and they recommended me to talk to tax advisor.
Code 2 is Early distribution, exception applies (under age 59½).
Code 1 is Early distribution, no known exception
Why do you believe you should pay the 10% early distribution penalty since that is what Code 1 means with no known exception?
Yes, that is correct. Code 1 is the right answer but the current 1099-r form was marked code 2. What do I need to do? Go ahead to file the income tax with code 2 that matched the 1099-r form and wait for the penalty and tax payment request from the IRS later on?
@tuanngnttax wrote:
Yes, that is correct. Code 1 is the right answer but the current 1099-r form was marked code 2. What do I need to do? Go ahead to file the income tax with code 2 that matched the 1099-r form and wait for the penalty and tax payment request from the IRS later on?
File the form as received and then wait to see if the IRS will assess the penalty.
I took out 13k; so how much do you think the penalty will be?
@tuanngnttax wrote:
I took out 13k; so how much do you think the penalty will be?
If the withdrawal was because of Covid-19 the penalty will be waived. Once you enter the Form 1099-R in the program you will be asked a series of questions, one of which will refer to Covid-19 and if it was the reason for the withdrawal.
Otherwise the penalty would be $1,300 plus any other penalties and interest assessed by the IRS.
How much other penalty and interest besides the 10% early penalty ($1300)?
For the reason of COVID-19, do I have to provide proof to IRS? and the box 7 distribution code is 2 for that right?
@tuanngnttax wrote:
For the reason of COVID-19, do I have to provide proof to IRS? and the box 7 distribution code is 2 for that right?
No you are not required to provide proof to the IRS. Why the Payer entered a code 2 in box 7 of the 1099-R can only be answered by the Payer.
The Covid-19 exception is only based on your need for the withdrawal. The Payer would not know why the funds were being withdrawn.
Do I have to provide additional paperwork to show irs that my withdrawal is due to COVID-19?
@tuanngnttax wrote:
Do I have to provide additional paperwork to show irs that my withdrawal is due to COVID-19?
No. And you only say that it was COVID related if you want to spread the tax over 3 years or repay it over 3 years.
The COVID exception is not based on need.
It is based on whether you were affected by COVID.
"Affected" is defined by the Tax Code.
You also must be affected by COVID to avoid the 10% early withdrawal penalty,
This has nothing to do with the three-year spread-out.
@fanfare wrote:
The COVID exception is not based on need.
It is based on whether you were affected by COVID.
"Affected" is defined by the Tax Code.
You also must be affected by COVID to avoid the 10% early withdrawal penalty,
This has nothing to do with the three-year spread-out.
The poster said the distribution code was 2 so there is no penalty. Unless they want to spread the tax or repay the distribution there is nothing to be gained by claiming a COVID distribution.
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