Had to do an excess of return on my IRA the money it earned for a prior yr return. I am over 59 1/2. I amended prior yr return w/ 1099-R. Do I need file a 5329 also?

[Eralimited57]

When I amended my return and put in the 2020 1099-R data into my amended 2019 return it never asked me about a 5329 but I am still wanting to know if I need to file a 5329 or not for my situation.

[dmertz]

If you were over age 59½ at the time of the return of contribution, there is no early-distribution penalty on the earnings.  If the return of contribution was from a Roth IRA, because the Form 1099-R for this distribution includes code J to indicate it's from a Roth IRA, you must file Form 5329 to claim an Other reason exception to the penalty, otherwise there is no need for Form 5329 with respect to this distribution.

[Eralimited57]

I still do not understand if I have to file a 5329 form or not.   Could a "turbotax expert" please help me by explaining specifically if I have to file a 5329?   The story again is:  In 2019 I put $7,000 into my Roth IRA (I am over 59 1/2).  Then a few months later I rolled over money from my IRA to my Roth.  I found out that I had gone over the limit of $203,000 MAGI and so I have to to a "return on excess" and pull the money back out of my Roth plus the earnings on it ($210.71) and this was done.  Now I got a 1099-R that has the year 2020 on it that shows in box 1 (Gross Distribution) $7,000 and in box 2 (taxable amount) $210.71. The codes in box 7 are P and J.  So I found out that I had to amend my 2019 taxes which I did and added in the 1099-R with the data I mentioned above so I got a 1040X out of it and I owe a small amount of tax (on the $210.71). 

When I amended my 2019 in turbotax it never mentioned that I need to do a 5329.

The question I have is do I have to file a 5329 even thought turbotax never mentioned one when I did my 2019 amendment?

thanks in advance

Lee

[dmertz]

Yes, your amendment must include Form 5329.

If 2019 TurboTax is not creating Form 5329, it suggests that you did not tell 2019 TurboTax that this is a 2020 Form 1099-R but instead told TurboTax that this is a 2019 Form 1099-R (except that if you didn't tell TurboTax that it was a 2020 Form 1099-R 2019 TurboTax would also not have properly included the $210 on Form 1040 line 4b).  Or did TurboTax prepare Form 5329 and you just didn't print it and include it with your mailed amendment?

Because your return of contribution was from a Roth IRA and there were taxable earnings in box 2a, your amendment must include Form 5329 Part I to claim a code 12 (Other) exception on line 2 to the 10% early-distribution penalty that would otherwise be assessed on Form 5329 on the $210.71 of taxable earnings.  This is because code J normally indicates an early distribution, but, since you were over age 59½ at the time of the return of contribution, the code J in this case only means that the return of contribution was from a Roth IRA.

[Eralimited57]

Dmertz,

I did tell Turbotax that it was a 2020 1099-R and still it did not make any mention of my having to deal with a 5329.

I would expect if a 5329 were needed would not Turbotax lead me to it?

Lee

[Eralimited57]

Well Dmertz you were right!!!!!!!!!

I paged thru my print out and what do you know.

A Form 5329 is in there and filled out!

A big shout out to Turbotax!

Love it.

Thanks again Dmertz

Lee

[dmertz]

Although TurboTax added it to your forms list, TurboTax probably would not have provided you with any direct indication that it had done so.  To eliminate the penalty on the $210 you can go to Other Tax Situations -> Additional Tax Payments -> Extra tax on early distributions and enter $210 in the Another reason box.  That will put the $210 with code 12 on line 2 of Form 5329.  Your filing should still include this Form 5329 to claim the exception to the penalty.

[Eralimited57]

Thank you so much for helping me Dmertz.

I did what you said in your message above and now my 5329 form shows the following:

LINE 1: $211

LINE 2: $211          The exemption number shown is 12.

LINE 18: $0

That is all it shows on the 5329 form.   Does that sound right?   So does this puts this to "bed" and I won't be taxed on this ever again or get some sort of tax penalty etc. later in the future?

Lee

[dmertz]

Yes, that's correct.

[Eralimited57]

Also do I only sign and date the 1040X and nothing else or?

Lee

[dmertz]

Your amendment would include Form 1040-X and Form 5329 with your signature on the Form 1040-X.  You would only need to sign Form 5329 if you were sending Form 5329 stand-alone.

[Eralimited57]

Also this is the reason I gave:

I am reporting the withdraw of excess IRA contributions and earnings from a 1099-R.

Does that sound right?

Lee

[dmertz]

Sounds reasonable.

[Eralimited57]

Ok great

Thanks so very much I sincerely appreciate your help.

Lee