Pre 59.5 distribution

Submitted by Don Warnke on Fri, 2019-03-01 17:28

Individual age 58 liquidates TIRA, he is disabled however his IRA custodian issues 1099 as “pre 59.5 distribution with no known exemption” since they are not aware of the disability. How does his tax advisor handle this so there is no early withdrawal penalty?



Submitted by Alan - IRA critic on Fri, 2019-03-01 18:12

  • A Form 5329 can be filed with exception code 03 entered on line 2.  However, in the event of an audit the individual will need to produce some evidence of the disability. The best documentation is a signed statement from the MD that individual is disabled under the terms of Sec 72(m)(7) copied below.
  • 72(m)(7) MEANING OF DISABLED. –For purposes of this section, an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require.

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