It should be a code 2. Contact the issuer and ask for a corrected form.
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Unless you were age 55 or over in the year you separated from service from the company providing the 401(k), Code 1 is correct. Using a distributions from a 401(k) to buy a home does not qualify as an exception to the early-distribution penalty. That exception is only available for a distribution from an IRA for the purchase of a first home, not for a distribution from a 401(k).
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