Form 5329-t generated when not needed.

[GJS60]

When doing my 2023 Income Tax I noticed that TurboTax Deluxe Desktop generates form 5329-t entering a value on line 2 of Part I, with an exception number of 12.

This is being generated automatically after entering a 1099-R with the distribution code in box 7 being a "U". This distribution is already exempt from early distributions, and it is not an early distribution as I am older than 59 1/2.

When I look at the IRS instructions for Form 5329, it says that exception 12 is for "Distributions incorrectly indicated as early distributions by code 1, J, or S in box 7 of Form 1099-R. Include on line 2 the amount you received when you were age 591/2 or older." Exception 15 is "Distributions that are dividends paid with respect to stock described in section 404(k)" which is what a distribution code "U" is in box 7 of the 1099-R.

I've had this same Distribution coded U in the past few years and Form 5329 was never generated before, however when I opened up my previous two years TT programs, there was an update that took place and now form 5329 is generated for my pervious taxes. When I look at my printed tax form there is no Form 5329.

Why is TurboTax generating this form when it is not needed?

Thanks,

GS

[dmertz]

A properly entered Form 1099-R with cod U in box 7 does not cause TurboTax to create an entry on Form 5329.  If you are using the CD/download version of TurboTax, make sure that you are not making entries in forms mode.  If all else fails, delete your Forms 1099-R, delete the Form 5329, then reenter the Forms 1099-R.

[GJS60]

dmertz,

Thanks for your reply.

I have started 3 new tax returns and only used the Step-by-Step view to answer the questions, and whenever I use code U in box 7 when entering Form 1099-R TurboTax does create Form 5329-T.

As I stated it enters the amount from line 1 of the 1099-R on Form 5329-T in Part I, Column A, Line L in the "Distributions Not Subject to Additional Tax Smart Worksheet" and also on line 2. It also enters exception 12 on line 2 as well.

I agree that it should not generate Form 5329-T, but I have tried it several times and it always generates Form 5329-T when box 7 is set to code U.

I have entered the form 1099-R using code 7 in box 7 and no Form 5329-T is generated, then if I go in and edit the 1099-R and make box 7 a U Form 5329-T is then generated.

Have you tried this recently? It happens to me every time. I think there is a bug in the program. 

I also did what you suggested, deleting Form 5329-T and the 1099-R and reentering it, but again the same thing happens.

Please help.

Thanks

[dmertz]

I was not able to reproduce the symptom with either the CD/download version or the online version of TurboTax.  When I created a tax return for someone age 33 with the only income being a Form 1099-R with an amount in box 1, the same amount in box 2a, no box 2b boxes marked, code U in box 7 and the IRA/SEP/SIMPLE box unmarked, Form 5329 was not produced.

Do you have any other Forms. 1099-R entered?  There have been a few occasions over the years where TurboTax has had some bizarre interactions between Forms 1099-R, although all of those I'm aware of have been resolved.

[dmertz]

I'll note that one other post this year has mentioned the symptom, so something mysterious seems to be happening.  I'm curious if you can eliminate the symptom by deleting other things in your tax return.  (If you experiment, experiment with a copy of your tax file, not the one you will eventually use to file.)

[GJS60]

Hi dmertz,

Thank you for working with me on this.

You hit on something in your trying to duplicate the issue. Form 5329-T is only populated if the age of the filer is over 59 1/2 years old. I experimented using the same age that you did (33), and only one 1099-R just as you did, and Form 5329-T was not populated.

I then changed the birth date to 07/10/1963 and during the questions after inputting the 1099-R I was asked if I received the distribution after turning 59 1/2 years old. If I select NO, Form 5329-T is NOT populated. If I select YES, Form 5329-T is populated. Alos if you change the birth date to the year of 1962 or earlier, you are not asked the question about if you received the distribution after age 59 1/2 because you would not have turned 59 1/2 during that year, and Form 5329-T is always populated when box 7 is a U on the 1099-R.

Another note to mention, the 1099-R must be updated AFTER you change the birth date, as Form 5329-T will not be generated just by changing the birth date. Also once Form 5329-T has been generated it will remain even after you make changes to either the 1099-R or the birth date. In that case you will have to delete Form 5329-T and make your changes to see if it is generated due to your changes.

Hopefully you will be able to duplicate this and get the issue resolved.

Once again thank you for your help!

[dmertz]

I tested with age 33 because I made the mistake of assuming that TurboTax would not behave this way unless the individual was under age 59½.  I just did some checking and this bug has been present at least as far back as 2013 TurboTax, so don't expect it to get fixed.

I'm surprised that I've haven't seen mention of it before.  It's appears to be present only in step-by-step mode of the CD/download version of TurboTax, not in the online version.  As you said, it also appears that you can simply delete the Form 5329 and the extraneous entry will disappear unless you revisit the Form 1099-R in step-by-step mode.

[GJS60]

Hi dmertz,

I don't remember it being a problem in 2021 or 2022 when I filed my taxes, Form 5329-T is not included in my copy of those taxes. I don't remember having to delete the form.

I guess I will just delete the form, but by deleting it I would guess I am voiding my calculation guarantee from TurboTax.

Do you work for TurboTax?

Thanks

[dmertz]

I've just been a TurboTax user for about 30 year and answer a lot of questions related to TurboTax and retirement accounts.  I've also been a professional software programmer, tester and debugger, so I'm always curious about potential bugs in TurboTax.  Over about 8 years I reported about 100 items that I considered to be bugs, about half of which Intuit has fixed.  I no longer participate in reporting TurboTax's bugs, but I'm still curious about them and possible workarounds that can help users.

[GJS60]

Hi dmertz,

Thanks for your help.

Do you know how I can report this bug to TurboTax?

Thanks Again!

[dmertz]

Perhaps one of the employee Experts like @JohnB5677 or one of the Champs like @DoninGA can pass this along.

[dmertz]

After a little more checking, I found that this bug first appeared in 2012 TurboTax and, as far as I know, has been present ever since.

[GJS60]

Hi dmertz,

It would be appreciated if someone from TurboTax would look at this issue.

So, what I have determined is that TurboTax will generate Form 5329-T when code "U" is used in box 7 of a 1099-R if the filer is over the age of 59 1/2 years old but does not if the filer is under age 59 1/2. 

Form 5329-T should not be generated when code "U" is used in box 7 of a 1099-R regardless of age.

If you know how to get someone from TurboTax involved, please let me know, or feel free to pass this thread on to them.

Thanks

[BillM223]

@GJS60 

@dmertz 

Am I correct in understanding that the 5329 has no negative effect on your tax return? That the only question is why is it there in the list of forms?

I have seen other situations in which a form appears in the list of forms for the desktop product, but if the form is not needed (whatever the definition of "needed" is), it is not actually part of the e-file packet. For example (and dmertz will recognize this), if there is a married couple and one spouse has an HSA, a form 8889-T is completed (which is correct); however, an 8889-S is also created for the spouse even though the spouse does not have an HSA. 

To the best of my knowledge, the 8889-S is not filed with the e-file packet, but was used as a filler during the tax preparation process. I wonder if this 5329 situation is similar, that the 5329 is created but not sent as part of the e-file packet.

This is why I wanted to confirm that this 5329 has no negative effect on GJS60's tax return, such that if it were not part of the e-file packet, it would not make any difference.

[dmertz]

Correct, it's simply that this reporting on Form 5329 is extraneous.  However, it does print when printing the tax return for filing, so I assume that it's included in the e-filing.  It doesn't add to tax liability, though, so it's probably harmless.  I'm sure many have filed this way over the years and have not had it cause any negative feedback from the IRS.

It's a bug, but I would consider it very low priority, particularly because the extraneous form can be deleted before filing and will not return unless the user edits the code-U Form 1099-R.