Client withdrew 26,000 from a traditional IRA for first time home buyer purchased , distribution code says 1 on the 1099-R, in order to avoid the penalty it should be J. Is it that to avoid the penalty the distribution needed to be from a Roth IRA ?

[Just-Lisa-Now-]

Re: Client withdrew 26,000 from a traditional IRA for first time home buyer purchased , distribution code says 1 on the 1099-R, in order to avoid the penalty it should be J. Is it that to avoid the penalty the distribution needed to be from a Roth IRA ?

No, Code 1 is probably correct for a traditional IRA if hes under 59½ years old.

The 26K is still taxable income, its just the penalty on 10K of it that you can get waived.  The penalty waiver is done on Form 5329.

[Co180]

Thank you Lisa! I have been trying to enter the exception number "9" on form 5329 but is not letting me  ..... am I missing something that I need to do on the 1099-R so that the number "9" flows to form 5329?  

[qbteachmt]

You don't "do" anything "on" the 1099-R. It is code 1. Not J or 9, there.

I found these resources for you:

https://proconnect.intuit.com/community/help-articles/help/proseries-form-1099-r-faq-s/00/4853

https://proconnect.intuit.com/community/proseries-discussions/discussion/1040-form-5329-entering-exc...

https://proconnect.intuit.com/community/proseries-discussions/discussion/1099-r/00/62065

[Just-Lisa-Now- · Accepted solution]

Im using Professional, not Basic, so Im not sure how different our screens are....but this is what my 5329 looks like.  I just enter the dollar amount into the smart worksheet and it inserts the code 9 automatically