10% penalty on qrdo distrbution that was left in company pla
I have a client that received a QRDO from her Husband’s retirement account in 2006.She left the money in the plan account to avoid the 10% penalty on pre-mature distributions since she is under 59 1/2. She made distrbutions in 2006,2007,2008, and no peanlty was assessed in 2006 and 2007. The IRS sent her a letter assessing a penalty for 2008. I would appreciate your comments.
Permalink Submitted by Alan Spross on Thu, 2010-03-11 02:06
She has to claim the QDRO exception to the penalty by adding a Form 5329 (Part I) to her return and entering the Code “06” on line 2. 1099R Inst do not provide for the plan administrator to show an exception code, which is rather odd since they have every reason to know that a QDRO applies.
No telling why the IRS did not question this for the two prior years, but she might as well send them a 5329 for all the years while she is at it. She will have to continue this each year until after the year she turns 59.5.
Permalink Submitted by James E Cobb on Thu, 2010-03-11 17:28
Thank you for the response this should be very help to my client.