How do I input IRA early withdrawal Substantially Equal Periodic Payments (SEPP) if my 1099-R shows Code 1 (no exception) and not Code 2 (with exception - SEPP) in Box 7?

It depends. it would have been simpler if the code would have been entered as Code 2 but there is a way to waive the penalty. Here is how.

1. When you enter your 1099R information, make sure you check the box that says the IRA/SEP/Box is checked.
2. This is important especially if you are working in the online version of Turbo Tax. Because in  a follow up screen it will ask if this is a SEP account.
3. Now as the navigate through the screens, there will be a screen that asks if you used your IRA to pay any of these expenses. Here you will record the entire amount reported on your 1099R as equal periodic payments.
4. Your penalty is now waived.

SEPP is set up on a Substantially Equal Periodic Payment plan.  As long as you adhere to the conditions of the plan, your early withdrawal penalties will be waived. Here is a screenshot of the screen i mentioned earlier. The number that is illustrated there is for illustration purposes only.