I am trying to help in her IRA distribution. She is widow , her last child is 18 in 2011. She has no other income. I asked her tax preparer to find out can she withdraw some money from IRA before 59 1/2 with the hardship of not having any income? He replied she can withdraw as long as she with draw same amount next 5 year, she can withdraw without IRS early withdrawl penalty . She does exact that. When she receives 1099R from IRA fund manager, she receives code 1 meaning early distribution , no known exception.

Q. 1 Can tax preparer change code when he or she complete tax form to code 7G or what ever may be , where by she does not have to pay penalty?

Q. 2 I know IRS fund manager shows code 1, how they can correct to right code after the fact. And issue corrected 1099R form.

Q 3. If fund manger refuse to change fund code, who would have authority to change?IRA

Q. 1 Can tax preparer change code when he or she complete tax form to code 7G or what ever may be , where by she does not have to pay penalty?


No, the preparer can not change the 1099-R form. However, she can file form 5329 to claim the exemption from the penalty. On that form she should indicarte code 2, "Distributions made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from an employer, the payments must begin after separation from service)" - this is also known as a section 72(t) withdrawal. I also suggest that she contact the IRA custodian and explain the situation - it seems they aren't aware that this is the firsy of at least 5 equal distributions, and so they ought to be able to correct the 1099-R to show code 2 instead of 1.




Q. 2 I know IRS fund manager shows code 1, how they can correct to right code after the fact. and issue corrected 1099R form.?

Contact the custodian and ask if they can issue a corrected 1099-R.



Q 3. If fund manger refuse to change fund code, who would have authority to change?IRA

As above - no one but the custodian has the authority to change the 1099-R. But you can file form 5329.