I was told I need to file IRS Form 5329 for IRA distribution to tell IRS it is not taxable (first time home purchase). I can't find how in Turbotax--it is necessary?

[johnbanksleonard]

TT asked me the reason of the distribution. I recorded it in the right box (first time home purchase) and TT automatically responded it was not taxable (yay), but later on it summed this in a taxable column, so I'm not sure if it thinks it is taxable or not.  Previous posts say to do a search for form 5329 and submit it via TT, but this option is not showing when I search.  Another post alluded that I need to upgrade products.  What am I missing?  

[MaryK4 · Accepted solution]

If you entered the information (and it sounds like you did), the Form 5329 is automatically generated.  The 5329 is a waiver of the early withdrawal penalty (10%), but you would still have to pay the normal income tax on the distribution.  You do not need to upgrade the product to report this transaction.

[VolvoGirl]

The first time home purchase only avoids the 10% Early Withdrawal Penalty and only on $10,000 of it.  

[gvrp]

Can't find a way to add 5329 form to my tax return to report removal of excess contributions and earnings. How can I do it in Turbotax? 

[BillM223]

If you told TurboTax that you would remove all the excess IRA contributions by the due date of the return, then there is no penalty so no need for the 5329.

The excess contributions and the earnings will be reported to you on a 1099-R with the appropriate distribution code. You will normally file the 1099-R on your 2023 tax return. I am assuming that you did this while doing your 2022 tax return in early 2023, right?