1099-R and Distribution Code

L1: 1099-R and Distribution CodeI just received my 1099-R from Morgan Stanley for 2007. I actually received two 1099s. One was for distributions for January through May and had a Distribution Code of 2. The second 1099 was for the remainder of 2007 and a Distribution Code of 7. The1099s totaled correctly for my 2007 distributions under my 72t. When I talked to MS, they said because I turned 59 1/2 in June, the June through December distributions reflected a Distribution Code of 7 per their policy.
1. Will this raise a flag with the IRS. I have to continue my 72t distributions through June 2009 in order to meet my five year requirement(plan started in July 2004)?
2. I use TurboTax to file…does anyone have experience in how to access the appropriate form to file to show the June through December distributions were eary but with exceptions?
Any advice is appreciated!
2008-01-30 08:50, By: RetiredGene, IP: [71.52.113.218]

L2: 1099-R and Distribution CodeFortunately you have one of the few fiduciaries that prepared TWO 1099-R forms, and coded each one properly. Most of them incorrectly prepare just ONE 1099-R with a single code. ThenYOU must prepare and file a form 5329 to straighten out the IRS.
The payments AFTER 59 1/2 wereNOT EARLY DISTRIBUTIONS. THey are payments as part of a SEPP PLAN that you must continue for 5 years.2008-01-30 13:35, By: dlzallestaxes, IP: [151.197.41.241]

L2: 1099-R and Distribution CodeHello ReitiredGene:
The dual 1099R”s should not, in general, raise any flags with the IRS; they pretty much know how old you are as well.
With respect to Turbotax; somewhere early on the in the interview, TT will ask you to input any and all 1099R”s received which you should do inputting both 1099R”s received.
Actually, becuase the two 1099R”s you received are coded as 2 and 7; TT is not going to think that any of the $$$ should be surtaxed; thus, there should be no need to file form 5329. However, if you want to force a 5329 to be produced; then input the 2nd 1099R as 1 instead of 7.
Then, 4 or 5 sections (about 45 minutes) later, TT will come back at you indicating that some of your distributions will be surtaxed unless you affirmatively allocate the distirbution amounts to other permissible reason codes. Remember that this section of TT is necessarily generalized to handle all kinds of other surtax exceptions. At this point check the box on the screen for SEPPs and key in the dollar amount of your 1099R and TT will automatically produce the 5329.
TheBadger
wjstecker@wispertel.net
2008-01-30 14:54, By: TheBadger, IP: [72.42.66.180]