Distribution code 7
L1: Distribution code 7I found this in another post – [quote]IRS GreetingsFolks, not to throw a monkey wrench into the conversation but in reviewing the letter from the IRS closer they have also included the proceeds from my former employer’s pension plan. I was having trouble figuring out where they came up with their ten percent additional tax number and when I reviewed my tax return I realized that they want ten percent for proceeds from my monthly pension also. The 1099R form from the former employer has a code of 7 in box 7 of the form which designates a Normal Distribution. I think that they have screwed this up all the way around. The annual pension accounts for just over 10% of the total additional tax they are requesting. Apparently they have disregarded everything that was filed with them. On my form from HR Block they said that they saved me money because I qualify for the penalty exemption [/quote]I, too, took a pension at age 54; equal payments every month until I die. My 1099R’s come with a code 7 also. So far I haven’t heard anything from the IRS. Hopefully I’m OK.2011-02-12 19:13, By: JT, IP: [188.8.131.52]
L2: Distribution code 7JT,You shouldn’t have anything to worry about with a Code 7. I assume you were over 59.5 for the entire year of 2010. The post you quoted most likely was correct in it’s opinion about a screw up. The IRS had a problem with the 72t plan and some poorly trained IRS Rep did not even try to separate the other 1099R forms from the 72t plan. I suspect that his case was an aberration, and if your only 1099R was coded 7 you should have almost no risk of the IRS asking for the 10% penalty.2011-02-13 01:02, By: Alan S., IP: [184.108.40.206]
L3: Distribution code 7I will not be 59 1/2 until Nov. 24, 2012.I’ve heard people talk about code 7 on the 5329 for, but I don’t see one mention of it anywhere in the instructions.2011-02-13 03:21, By: JT, IP: [220.127.116.11]
L4: Distribution code 7The usual codes on the 1099-R are 1,2, or 7. There are also other single digit and letter codes.The codes on the 5329 are 2-digit.You are confusing the 2 forms as if they were the same form.The 1099-R is issued by the plan custodian. The 5329 is prepared by the taxpayer or tax return preparer if they disagree with the code on the 1099-R.2011-02-13 04:31, By: dlzallestaxes, IP: [18.104.22.168]
L4: Distribution code 7I also took a lifetime annuity (my pension) when I retired at age 55, (in 2005) and it has always been coded with a “7” in box 7, so no need to file 5329 for that. I do file a 5329 one for an IRA SEPP plan that I started at age 57, and is coded “1” by Vanguard.Here is how code “7” (in box #7) of the 1099-R is defined in IRS instructions for that form.
Use Code 7: (a) for a normal distribution from a plan, including a traditional IRA, section 401(k), or section 403(b) plan, if the employee/taxpayer is at least age 59_, (b) for a Roth IRA conversion if the participant is at least age 59_, and (c) to report a distribution from a life insurance, annuity, or endowment contract and for reporting income from a failed life insurance contract under sections 7702(g) and (h). See Rev. Proc. 2008-42, 2008-29 I.R.B. 160, available at www.irs.gov/irb/2008-29_IRB/ar19.html. Use Code 7 with Code A or Code B, if applicable. Generally, use Code 7 if no other code applies. Do not use Code 7 for a Roth IRA.Note:Code 1 must be used even if a taxpayer is 59_ or older and he or she modifies a series of substantially equal periodic payments under section 72(q), (t), or (v) prior to the end of the 5-year period.This link is to IRS instructions for filling out form 1099-R. You can find instructions for form 5329 at same site, but I think you should study the explanantion of the codes that start on form 1099-R. Click on the Box 7 topic to jumnp down to there, and then scroll down further to see the detailed explanations of all the codes that can be used in Box 7 under title “Guide to Distribution Codes” http://www.irs.gov/instructions/i1099r/ar02.html#d0e1651
KEN2011-02-13 04:48, By: Ken, IP: [22.214.171.124]