SIMPLE IRA Distribution, Taxable?

[jmarti]

What is the name of your state? Illinois

I'm filing my Dad's taxes and I'm having a problem. He took an $8,000 distribution from his IRA (SIMPLE-IRA) last year, he was 60 then. The 1099-R form he received marked the distribution as a "Normal Distribution" (Box 7), shouldn't it be a "Qualified Distribution" since he was older than the required 59 1/2 at the time? For the "Taxable Amount" (2a) they put down the full $8,000 but they also checked the box for "Taxable amount not determined" (2b) so that confused me as well. Now I'm forced to count the $8,000 as income, I'm using TurboTax and I can't seem to find an alternative to paying, it says only that the distribution is taxable since the 1099-R doesn't specify otherwise. So my question is if there is possibly a form I could add to clarify that my Dad was able to take the money without penalty? Should I take this with the issuers of the 1099? To have it corrected perhaps. Or is the money taxable no matter what?

Also, for the state return the $8,000 wasn't taxed, it's only a problem with the federal.

[FlyingRon]

Q - qualified applies only to ROTH. His SIMPLE / Trad. IRA deductions are federally taxable. It's not a penalty, that money was never taxed, so he has to pay it now.

[LdiJ]

Originally Posted by jmarti

What is the name of your state? Illinois

I'm filing my Dad's taxes and I'm having a problem. He took an $8,000 distribution from his IRA (SIMPLE-IRA) last year, he was 60 then. The 1099-R form he received marked the distribution as a "Normal Distribution" (Box 7), shouldn't it be a "Qualified Distribution" since he was older than the required 59 1/2 at the time? For the "Taxable Amount" (2a) they put down the full $8,000 but they also checked the box for "Taxable amount not determined" (2b) so that confused me as well. Now I'm forced to count the $8,000 as income, I'm using TurboTax and I can't seem to find an alternative to paying, it says only that the distribution is taxable since the 1099-R doesn't specify otherwise. So my question is if there is possibly a form I could add to clarify that my Dad was able to take the money without penalty? Should I take this with the issuers of the 1099? To have it corrected perhaps. Or is the money taxable no matter what?

Also, for the state return the $8,000 wasn't taxed, it's only a problem with the federal.

Any withdrawals from an IRA are taxable. That is the whole purpose of an IRA. Tax is deferred at the time that the money is put into the IRA, but tax must be paid when it is withdrawn. The 59 1/2 year rule applies to the additional 10% penalty for early withdrawal. The payor properly coded the withdrawal as a normal distribution, (because your dad is older than 50 1/2) so he is not subject to the 10% penalty, but he does need to pay regular income tax on the withdrawal....at least on the federal level.

[tranquility]

Also, make sure he didn't make any non-deductable contributions. If he did, you take the distribution proportionally from taxable and non-taxable.

[jmarti]

Alright, thank you all for the very quick replies. Makes sense that only the penalty is waved at age 60 and I'm also guessing he should have opted to have the income tax withheld when he got the distribution.

Again, thank you all for your time.