My father is was 64 in 2023, he had a pension plan 401-b with about $10,661 that was just sitting since 2000. In 2023 he decided to withdraw the money 1099-R box 7 = 1 and IRA/SEP/SIMPLE is not checked. Federal tax withheld = $2,132. He got reminder of the money $8k or so. Filing this in TurboTax as 1099-B, the program told us that because he withdraw money early, he needs to pay additional $1000 in taxes:
The plan administrator used the wrong code in box 7, it should have been a 7 for a normal distribution. There would only be a 10% early withdrawal penalty if he was under the age of 59 1/2 when the funds were withdrawn.
By using a code of 1 in box 7 that indicates - Early distribution, no known exception (in most cases, under age
59½).
You need to contact the plan administrator or the Payer and get a corrected Form 1099-R.
The plan administrator used the wrong code in box 7, it should have been a 7 for a normal distribution. There would only be a 10% early withdrawal penalty if he was under the age of 59 1/2 when the funds were withdrawn.
By using a code of 1 in box 7 that indicates - Early distribution, no known exception (in most cases, under age
59½).
You need to contact the plan administrator or the Payer and get a corrected Form 1099-R.