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Form 5329 still required for Non Qualified Annuity distribution?

I am copying a previous reply. Why has this not been fixed since 2019? Do I just delete the Form before filing?

 

Okay- wont let me copy previous. Basically has to do with Form 5329 being generated when taking a distribution from a Non-Qualified annuity. Keeps putting total distribution amount on Line 2 as an "Incorrect early distribution -code L".  Supposedly has been going on since 2013 with lots of queries in 2019.  IS Turbo Tax populating this form in Error? Do I just delete the Form before filing? Somone who is dealing with this issue please respond with advice or how to resolve it, or confirm it has to be filed although no penalty or tax due.

 

Thanks in advance.

 

 

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2 Best answer

Accepted Solutions
dmertz
Level 15

Form 5329 still required for Non Qualified Annuity distribution?

This is apparently only a problem in the CD/download version of TurboTax.  TurboTax has a similar problem with ESOP dividend distributions reported with code U.  You can just delete Form 5329 in forms mode of TurboTax and as long as you do not revisit the related Form 1099-R in step-by-step mode, the entry on line L of TurboTax's Distributions Not Subject to Additional Tax Smart Worksheet will not reappear.

 

However, in the case of code D, this problem does not happen if code D is combined with code 7 to explicitly indicate that it's not an early distribution, which is permissible.  Code D is generally considered to be a secondary code to indicate the nonqualified nature of the insurance product, so payers will generally combine code D with code 1, 2, 3, 4, 7 or C.  On the other hand, combining code U with any other code is not permitted.

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dmertz
Level 15

Form 5329 still required for Non Qualified Annuity distribution?

I would probably just delete the From 5329 before filing.  If the Form 1099-R shows no tax withholding you could add the code 7 since without tax withholding the details of the From 1099-R won't be transmitted with your filing, but that's unnecessary if just before filing you make sure that the Form 5329 has been deleted.

View solution in original post

10 Replies

Form 5329 still required for Non Qualified Annuity distribution?

Where are all my experts?? No one has an answer for this question?? Help!

dmertz
Level 15

Form 5329 still required for Non Qualified Annuity distribution?

This is apparently only a problem in the CD/download version of TurboTax.  TurboTax has a similar problem with ESOP dividend distributions reported with code U.  You can just delete Form 5329 in forms mode of TurboTax and as long as you do not revisit the related Form 1099-R in step-by-step mode, the entry on line L of TurboTax's Distributions Not Subject to Additional Tax Smart Worksheet will not reappear.

 

However, in the case of code D, this problem does not happen if code D is combined with code 7 to explicitly indicate that it's not an early distribution, which is permissible.  Code D is generally considered to be a secondary code to indicate the nonqualified nature of the insurance product, so payers will generally combine code D with code 1, 2, 3, 4, 7 or C.  On the other hand, combining code U with any other code is not permitted.

Form 5329 still required for Non Qualified Annuity distribution?

Thank you Level 15. You are the Best!

Form 5329 still required for Non Qualified Annuity distribution?

But just to confirm-- I do load Code 7 D as it is on 1099 Form.  But I plan to delete the 5329 when I e-File. Thanks.

Form 5329 still required for Non Qualified Annuity distribution?

And I do use the Downloaded Premier version.  Apologize for multiple replies.

Thanks again.

dmertz
Level 15

Form 5329 still required for Non Qualified Annuity distribution?

I would probably just delete the From 5329 before filing.  If the Form 1099-R shows no tax withholding you could add the code 7 since without tax withholding the details of the From 1099-R won't be transmitted with your filing, but that's unnecessary if just before filing you make sure that the Form 5329 has been deleted.

Form 5329 still required for Non Qualified Annuity distribution?

Thank you DMERTZ--- you have all the answers. Typed Level 15 earlier by mistake.  Regards

Form 5329 still required for Non Qualified Annuity distribution?

dmertz--- I have to apologize for the original question and you spending time on answering.  Something you said made me go back and look at the Annuity 1099 Form.  They had "D7" in the Distribution Code box.  Because TT defaults to the numbers first--I typed "7" followed by the "D".  Think this is what caused the Form 5329 to be generated.  I had deleted the Form, then went back through the 1099 Form, putting in the "D" first.  NO 5329 FORM GENERATED!!  I would not have figured this out without your help.  Anyone else run into this take note.

 

Thanks again.

Form 5329 still required for Non Qualified Annuity distribution?

For what it is worth, this solution did not work for me.  I entered the "D" first and then the "7".  5329 still generated.  There is still a bug in the works.

CatinaT1
Employee Tax Expert

Form 5329 still required for Non Qualified Annuity distribution?

Here is a FAQ: Why are 1099R coded 8J and 1099R coded PJ triggering incorrect follow-up options?

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