[zndzant]

I began collection SSD benefits in September of 2008. My last date of work due to disability was Mar 13, 2008. I withdrew my 401(k) money so that I could continue to meet my mortgage, living expenses and to pay medical expenses, including health insurance premiums.
I am trying to find out if this exempt from the 10% penalty. The 401(k) company has told me that it does not qualify because the SSD claim was not approved at the time of the withdrawal, therefore box 7 on the 1099-R is coded correctly with a 1. I spoke to someone at the IRS, and they said that as long as I have a written statement from my physician that I was disabled, it is exempt and the box should be coded as 03. The timing of the withdrawal and the approval of the SSD claim doesn't matter as long as I have a statement from my physician. I quess my question is twofold:
1. Do I need to get a corrected 1099-R? Or
2. Do I need to file form 5329(?) to report the exception?

Or is this transaction truly subject to the early withdrawal tax?

[ebaines]

If you are totally and permanently disabled then you meet the requirement for an exception from the 10% early withdrawal penalty. You do not need a corrected 1099-R, but you should complete and attach form 5329 to claim an exemption. I also suggest you include documentation that demonstrates your disability, such as a letter from your doctor.