Yea reading again and again, all depends how you translate it (hate taxes and tax laws) Thou Pub 575 does say:
"Exceptions to tax. Certain early distributions are ex-cepted
from the early distribution tax. If the payer knows
that an exception applies to your early distribution, distribu-
tion code “2,” “3,” or “4” should be shown in box 7 of your
Form 1099-R and you do not have to report the distribution
on Form 5329. If an exception applies but distribution code
“1” (early distribution, no known exception) is shown in box
7, you must file Form 5329. Enter the taxable amount of the
distribution shown in box 2a of your Form 1099-R on line 1
of Form 5329. On line 2, enter the amount that can be
excluded and the exception number shown in the Form
which conflicts with form 5329 "who has to file section??"
hey i have code 2, so no file "final answer" lol (
"do not have to report on form..." means no file form- ??, if u don't have other early penalities right?
my next problem is state taxes,
i live in MD (always)
the job location was in DE (last worked there 2 yrs so no direct income from DE?)
the 457 company paying the 1099-r is from DC (cry, cry) .
DE usally wants the taxes, if the employer is based there and then u need to get a state credit. I think. not sure.
the 457 company did use a state/payers no. of MD#####, so i think it is only subject to md taxes (cry, cry)
hopefully i would hate to file MD,DE,DC over a $40 (big retirement) or screw up the forms.