Discussion:Exceptions to penalty on early distributions
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Discussion Forum Index --> Tax Questions --> Exceptions to penalty on early distributions
| 8 April 2006 | |
| Client became disabled. Spouse made early withdrawal from 401k reported on 1099 with code 1. Does this qualify as an exception to the penalty? Withdrawal taken due to financial hardship brought on by taxpayer becoming disabled. | |
| 11 April 2006 | |
| If it MFJ return in form 5329 put code 03 for distribution made due to disability. | |
| 9 May 2008 | |
| Is it true that the penalty exception applies if the spouse is disabled and the taxpayer got the distribution (MFJ)or vice versa? | |
| 10 May 2008 | |
| Mike, don't ask for 'opinions' ask for cites so you can look up yourself. You'll get more accurate information. Cite is IRC 72 | |
| 10 May 2008 | |
| Kevenh5, of course I looked it up. The law is often unclear and DIFFERENT opinions can be formed from differences in interpretations of the same law. That is why we have discussion boards, otherwise we could all just "look up yourself". Please! | |
| 10 May 2008 | |
| Actually the "cite" is Code Sec. 72(t)(1) .
Portions of the law use the term "taxpayer", which if MFJ would include the spouse. This added to my confusion, it implies the exception may include the spouse's disability. | |
Death&Taxes (talk|edits) said: | 10 May 2008 |
| Form 5329 is not filed jointly, and can be a form filed separately from a return. Only one signature is required. This was my first clue as to how to interpret early withdrawal penalties when I first confronted them, or any of the additional taxes levied on that form (e.g. Husband's failure to take Minimum Distribution from IRA is not offset by wife taking double her required amount). | |
| 12 May 2008 | |
| Mikeb
You might want to read TC Memo 2004-287. The taxpayer tried to extend his disabled wife to be considered the employee as defined in ยง72(t)(5) but to no avail. The judge wrote (caps added): "The record demonstrates that petitioner was the covered employee and plan participant. The record also demonstrates that the 1998 distribution was attributable to petitioner's retirement and not to any disability of HIS. Because section 72(t)(2)(A)(iii) requires that a distribution be attributable to the EMPLOYEE'S being disabled in order for the exception to the 10-percent additional tax to apply, we hold that petitioner does not qualify for the section 72(t)(2)(A)(iii) exception." | |
