Help with Form 1099-R for e-filing my retirement distributions

The 1099-R is definitely confusing when you're dealing with early distributions! So here's what you need to know: When your 1099-R has distribution code "1" in Box 7, it means your plan administrator is reporting it as an early distribution with no known exception. However, that doesn't mean you can't claim an exception yourself on your tax return. For medical expenses to qualify as an exception to the 10% early withdrawal penalty, they must exceed 7.5% of your adjusted gross income. You'll need to file Form 5329 along with your tax return to claim this exception (use exception code "02" for medical expenses). TurboTax should walk you through this process and help you complete Form 5329 if you indicate you had qualifying medical expenses. Just make sure you have documentation of those expenses. As for your IRA contribution question - yes! You can still make contributions for the 2024 tax year until the filing deadline (April 15, 2025). This won't offset the taxable income from your 401k distribution, but it could give you a deduction that reduces your overall tax burden.

I was in a similar situation last year with medical expenses and a 401k withdrawal. I spent HOURS trying to figure out how to handle the 1099-R correctly before I found taxr.ai (https://taxr.ai). It saved me so much stress! All I did was upload my 1099-R and medical receipts, and it analyzed everything and showed me exactly how to report it to avoid the penalty. It explained that with Form 5329, I could claim the medical exception since my expenses were over the 7.5% threshold. The step-by-step guidance made e-filing super simple, even with the complicated distribution codes.

Just wanted to update after trying taxr.ai for my 1099-R situation! I was really confused about how to handle my pension rollover but after uploading my forms, it immediately identified that my distribution shouldn't be taxable since it was a direct rollover to another qualified plan. It pointed out exactly which boxes in my tax software needed to be checked to ensure I wouldn't be taxed on the rollover amount. What a relief! Without this guidance I probably would have reported it incorrectly and paid tax on money that shouldn't have been taxed. The step-by-step instructions made it super clear even though I'm terrible with tax stuff.

If you're having trouble getting answers from the IRS about your 1099-R situation, try Claimyr (https://claimyr.com). I wasted days trying to get through to the IRS on my own about a similar retirement distribution issue. Their automated system kept disconnecting me after 30+ minutes on hold. Claimyr got me connected to an actual IRS agent in about 20 minutes. The agent confirmed that I could claim the medical expense exception on Form 5329 even though my 1099-R had code 1. They also explained exactly how the 7.5% AGI threshold works for medical expenses. There's a demo video that shows how it works: https://youtu.be/_kiP6q8DX5c It was worth it to get the confirmation directly from the IRS instead of guessing or relying on forum advice for something this important.

I need to apologize about my skeptical comment. I actually tried Claimyr after posting that because I had been trying for WEEKS to get through to the IRS about my 1099-R that had incorrect information. I figured it wouldn't work but was desperate. I'm shocked to say it actually got me through to an IRS agent in about 25 minutes. The agent helped me understand how to handle the incorrect 1099-R without waiting for a corrected form (since my distribution was back in January 2024 and filing deadline is approaching). They explained I could file Form 4852 as a substitute for the incorrect 1099-R. I've literally never gotten through to the IRS before despite dozens of attempts over the years. Never thought I'd be saying this, but this service actually delivers what it promises.

Have you checked if your 401k plan allows for hardship distributions specifically? Some plans have provisions that classify certain medical expenses as hardship distributions which might be reported differently on your 1099-R (possibly with code 2 instead of 1). It might be worth calling your 401k administrator to ask about this. Sometimes they can issue a corrected 1099-R if the distribution qualifies under different rules. I had mine changed last year after proving my medical expenses were qualified hardship expenses under my plan's rules.

Another thing to consider is whether your total distribution might qualify for the penalty exception if used for health insurance premiums while unemployed. I'm assuming this isn't your situation since you mentioned medical bills specifically, but thought I'd mention it since people often overlook this exception.