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Can 1099-R Box 7 Code 1 for social security disability recipient be changed on form 5329?

Level 2

I have a client that was approved for social security disability in 2023 and received benefits dating back to 2022.  She is 49 years old and was most recently employed by the U.S. Postal Service.  She withdraw all of her thrift savings plan retirement and the 1099-R was issued with code 1 in box 7.  It appears that the Postal Service has not deemed her as disabled even to this day.  Is there any basis for claiming disability on form 5329 even though the 1099-R has a code 1 in box 7 or is she stuck with the 10% penalty?


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3 Comments 3
Level 15

"the Postal Service has not deemed her as disabled even to this day."

Did she apply? Did she apply, get denied, and appeal? Or is she waiting on them to act first:


Does one of these apply:



"Level Up" is a gaming function, not a real life function.
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Level 15

If she is collecting Social Security Disability, yes, you can claim her as disabled for purposes of removing the penalty. 

It doesn't really matter how her employer views things. What matters is if she is actually disabled or not.  If Social Security admits a person is disabled, that is usually a 'shoe-in' for stating a person is disabled.


Level 15

Did she even ask the Postal Service to decide she is disabled (like, was she claiming a disability pension)?  The Postal Service does not own the Social Security Administration.  They just deliver its mail.  

IRS is a separate federal agency not related to either the Postal Service or the Social Security Administration.  The reason they have a Form 5329 is exactly to help taxpayers with this not-uncommon situation.