1099-R for lawsuit settlement

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  • #6262
    haroldml
    Participant

    I’m helping my daughter file her taxes with TTAx. She received a 1099-R for a settlement related to her 401(k): CLARK ET AL V OASIS OUTSOURCING HOLDINGS ET AL SETTLEMENT FUND. The amount is 71.48, it’s coded as a total distribution, & the Box 7 code is 1 since she’s under 59 1/2 so will be subject to a penalty. She tried reaching the phone number on the 1099-R but couldn’t talk to anyone. I’ve tried to find the settlement document but can’t find it. My first thought is that she should have received a 1099-MISC, enter it as miscellaneous income, write an explanation letter, & have her mail the return instead of filing electronically, but don’t know if this is the right way to handle it. But I can’t understand why she should have to pay a penalty for a distribution from a lawsuit. Please help.

    Thank you,

    HML

    #6264
    kaneohe
    Participant

    Probably too late now but it sounds like the funds were considered as a distribution from the 401K plan and perhaps could have been rolled back
    there (or into a TIRA) thus avoiding the early withdrawal penalty.

    #6265
    haroldml
    Participant

    Thanks. I was wondering about that so that’s why I was hoping to find the settlement document. Since the amount of the distribution isn’t large, it’s probably not worth spending more time on it.

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