Okay, so here's another situation I haven't run into before.
A client of mine initially told me she had only social security and pension income in 2012 and based on her total income, she was not required to file a return for 2012. However, she just received a notice from the IRS asking why she hadn't filed for 2012. Upon further investigation, I discovered that she made an early withdrawal of about $2100 from her annuity and a 1099-R was issued for 2012 showing a gross distribution and taxable amount in boxes 1 and 2a. Box 7 has a code "1" for early distribution.
The $2100 she withdrew was entirely for medical expenses. She was 58 at the time she withdrew it, and I don't think she would be considered permanently and totally disabled.
My question is, suppose she does qualify for one of the exceptions to the 10% penalty, because of substatial medical expenses. How do you show this on the return when you file it?
Thanks in advance.
---Chris Johnson, EA