Tax Law (Questions About Taxes)/401k distribution


hi john, i have a disability that prevent me from working.  i had a 401k that i withdrew the entire amount.  i explained to the broker that i am withdrawing the entire amount due to my disability. he claimed that they dont go by that, and that they dont indicate in the 1099-R that its due to disability.  he said they would indicate that distribution is taken and tax preparer has to indicate the money was taking due to disability.  in my 1099-R i received, in box 7 it indicate as 1.  how can i indicate in my taxes that this is due to disability?  when i change box 7 to number 3, i get more money than if i indiate 1 in box 7.  can i put 3 in box 7 even though my 1099-r says 1.  

please help how to approach this. the retirement broker was not help. he just kept saying that during tax preparation i will indicate it is due to disability.  on their side they have to say that all money was taken out.


Thanks for your question.

Code 1 states that there is no known exception, so you need to complete Form 5329.  Part I, line 2, enter code 03 and the amount of the withdrawal that the disability applies to (probably all of it).

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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