Is 1099-R code 1B treated as code 1 for 1040 schedule 2 line 8 exception to filing form 5329?

I recently received a 1099-R with distribution code 1B after taking some money from my retirement account. I'm trying to figure out if I need to file the 5329 form or not. From what I understand, there's an exception on the 1040 schedule 2 line 8 that might apply to me. The thing is, I'm not 100% clear if code 1B on the 1099-R is treated the same as code 1 for purposes of this exception. The 1099-R shows about $14,500 in distributions with code 1B, and I already paid the 10% penalty when I withdrew the money. I'm just trying to avoid unnecessary paperwork if possible. Does anyone know if code 1B qualifies for the 1040 schedule 2 line 8 exception to filing form 5329? My tax software is asking me about this and I don't want to make a mistake.

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21 comments

Victoria Jones

•8M

The code 1B on a 1099-R indicates an early distribution from a retirement plan with both the regular taxable amount plus a separate amount for the Roth portion. For purposes of the 1040 Schedule 2 line 8 exception, the 1B code is indeed treated like code 1, so you can use the exception. You're right that if the 10% penalty was already withheld, you don't need to file Form 5329 separately. You can just report the distribution and penalty on your 1040. The Schedule 2 line 8 exception is specifically designed for this common situation. Just make sure your tax software inputs the amount subject to the penalty correctly on Schedule 2 line 8, and you should be good to go without having to file the separate 5329 form.

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Victoria Jones

•8M

For code 2B, it's actually different. Code 2B typically indicates a distribution that isn't subject to the 10% early withdrawal penalty due to an exception (like first-time home purchase, qualified education expenses, etc.). In your case, you likely don't need to file Form 5329 either, but for a different reason - because your distribution is exempt from the penalty altogether. You'd still report the distribution on your tax return, but you wouldn't calculate or pay the 10% penalty.

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Jessica Nguyen

•8M

I went through this exact same situation last year and was pulling my hair out trying to figure it out. I ended up using https://taxr.ai to analyze my 1099-R and figure out how to report it correctly. The system confirmed that code 1B is treated like code 1 for the Schedule 2 exception. I found it super helpful because their AI actually explained the different distribution codes and what they mean for penalties. It saved me from having to file the extra 5329 form when I didn't need to.

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Jessica Nguyen

•8M

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Ruby Garcia

•8M

Ok I actually tried taxr.ai after my skeptical comment and I have to admit I was impressed. I uploaded my 1099-R with code 1B and it immediately confirmed what was said above - that it's treated like code 1 for the Schedule 2 line 8 exception. What surprised me was how it showed the exact text from the IRS instructions that confirmed this. I've been doing my own taxes for years and never knew about this exception! I'd been filing Form 5329 unnecessarily every time I took an early distribution. This is going to save me time and hassle this year.

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Alexander Evans

•8M

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Alexander Evans

•8M

It's actually completely legitimate and works with the IRS's own phone system. They use an automated system that continually redials and navigates through the IRS phone tree until it gets a spot in line, then it calls you to connect. No backdoors or anything sketchy - it's just automating what you'd have to do manually by repeatedly calling. The reason everyone doesn't use it is simply because not many people know about it yet. It's basically the same technology that customer service departments use to offer callbacks instead of making you wait on hold. Nothing magic, just smart use of technology to solve an annoying problem.

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Benjamin Carter

•8M

Alright, I have to eat my words about Claimyr. After posting my skeptical comment, I was still frustrated with not getting a clear answer about my tax situation, so I decided to try it. I figured it was worth a shot. To my surprise, it actually worked! I got connected to an IRS agent in about 20 minutes after trying for days on my own. The agent confirmed that for my 1099-R with code 1B, I qualify for the Schedule 2 line 8 exception and don't need to file Form 5329 separately. They walked me through exactly where to report everything on my return. Definitely changed my mind about this service. Saved me hours of hold time and frustration.

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Maya Lewis

•8M

Just a heads up - be careful with distribution codes on 1099-R forms. I made a mistake last year thinking code 1J was the same as code 1 for this exception, and ended up getting a letter from the IRS asking for the missing 5329 form. Had to file an amended return. The exception on 1040 Schedule 2 line 8 is pretty specific about which codes qualify. From my experience, codes 1, 1B, and 1D work for the exception, but other variants might not. If you're unsure, it's better to just file the 5329 to be safe.

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Maya Lewis

•8M

I just had to file the amended return with the 5329 form. No additional penalties because I had already paid the 10% early withdrawal penalty through withholding when I took the distribution. The IRS was actually pretty reasonable about it - they just wanted the paperwork filed correctly. The letter gave me 30 days to respond, and once I sent in the amended return with the 5329, everything was resolved. But it was still a hassle I could have avoided with better information upfront.

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Sofia Morales

•5M

I just went through this exact situation with my 2024 tax return! I had a 1099-R with code 1B for about $8,000 that I withdrew early from my 401k. Like you, I was confused about whether I needed to file Form 5329 separately. After researching and double-checking with the IRS instructions, I can confirm that code 1B is indeed treated the same as code 1 for the Schedule 2 line 8 exception. Since you already had the 10% penalty withheld when you took the distribution, you can simply report it on your 1040 and use the exception to avoid filing the separate 5329 form. The key is making sure your tax software correctly identifies that the penalty was already withheld and applies the exception. Most major tax software should handle this automatically when you enter the 1099-R information, but it's worth double-checking that Schedule 2 line 8 shows the correct penalty amount. One tip: keep good records of your 1099-R and any documentation about the penalty withholding, just in case the IRS has questions later. But you should be all set without the extra paperwork!

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Jamal Wilson

•4M

This is really reassuring to hear from someone who just went through the same thing! I was getting nervous about making the wrong choice since tax mistakes can be expensive. Your point about keeping good records is spot on - I've already scanned and saved my 1099-R and all the documentation from when I took the withdrawal. Did your tax software automatically populate Schedule 2 line 8 with the penalty amount, or did you have to manually enter anything? I'm using FreeTaxUSA and want to make sure I don't miss any steps in the process.

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