Where is the form 5329 on TurboTax?

[fuzzysueboulder]

I realized my IRA wasn’t taken out by 12/31/2021. I had it taken out by 1/6/2022, but I will need to file 5329. I can’t find the form on TurboTax and I want to make sure I can include it with my 1040 filed electronically.

[Critter-3 · Accepted solution]

First make sure going forward that the RMD is set for auto distribution for sometime mid December so you never have this happen again. 

Next ... the 5329 form will be mailed in separately from the return since you will not get a 1099-R for the distribution until next January ...   https://www.irs.gov/forms-pubs/about-form-5329

"Waiver of tax.   The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows. 
1. Complete lines 52 and 53 as instructed.
2. Enter “RC” and the amount you want waived in parentheses on the dotted line next to line 54. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line 54. 
3. Complete line 55 as instructed. You must pay any tax due that is reported on line 55.
  The IRS will review the information you provide and decide whether to grant your request for a waiver. "

OR ... since the IRS never seems to catch this error (30 years of personal experience + another 40 from a colleague) simply skip the filing of the 5329 ... and make sure you take the 2022 RMD timely and report both on the 2022 return.  

[fuzzysueboulder]

I thought I had signed up to automatically get the distribution. I saw on January 5 that I hadn’t gotten it and had it taken out on January 6.

What if I put in the correct amount on my 1040 as if I had received the distribution in 2021, and then also include a 5329 when I file online? Can I fill the 5329 online with TurboTax, put RC on line 54, and submit? Or do I have to print out a 5329 and mail it in?

[Critter-3]

NO ... you cannot enter a 2022 distribution on a 2021 return ... that will get you an IRS letter for sure ... both the 2021  & 2022 distributions will be reported on the 2022 1099-R and on the 2022 return.  

If you insist on filing the form it will have to be paper filed and mailed ... there are only a couple of lines to complete ... see the IRS instructions.  

[fanfare]

@fuzzysueboulder 

you can and should  file 2021 Form 5329 with this e-Filed tax return.

TurboTax should ask you about it somewhere.

Line 53 RMD : > 0

Line 52 actual distribution : 0

You will then get to present your explanation and request the waiver of shortfall penalty. Which will be granted.

Line 55:  0

The actual money is reported and taxed on 2022 return as sum of your 2021 and 2022 RMD.

[fanfare]

@fuzzysueboulder 

Followup:

As I recall from last year, TurboTax makes this difficult.

If you can't figure how to cajole TurboTax, you might consider other  better tax prep software for 2021 tax year.

[Critter-3]

You will need the downloaded version to force the form in the FORMS mode but you cannot attach the explanation to an efiled return ... so again if you insist of filing a form then fill it in manually, print, ink sign and mail it in by itself ... it is a stand alone form for a reason.   But again,  none of my clients have ever gotten an IRS letter on this matter and we skipped the 5329 completely if they had made the proper correction for future distributions AND this was their first missed payment.  We took the position that if the IRS was to ever question it the client would plead stupidity for the waiver of the penalty.  

[fanfare]

 "you cannot attach the explanation to an efiled return "

I'm pretty sure that's just not correct. TurboTax will open a panel for the explanation.

TurboTax may handle this better this year.

Note: other tax software will handle this just fine.

" standalone form for a reason"

deficiencies in TurboTax is not one of the reasons.

"stupidity"

Stupidity is not "Reasonable Cause"

Yet, IRS always grants the waiver if you took timely action to resolve the issue.

[suchislife]

Yes.  You can efile form 5329 1099-R  when you missed your RMD withdrawal date.  At least it can be done on Turbotax Premier CD/Download version. Assuming that you have completed the RMD before filing the returns for the previous year and have the amount and any state tax amounts involved in the withdrawal as normal.

When entering Fed Income section/Retirement Plans and Social Security section:

1-Enter the withdrawal amounts in a 1099-R table as if it were completed in the previous year by December 31.

2- Enter "continue" and follow the prompts until you come to a screen that says "Tell us more about this Retirement Plan Distribution".  You will then see three choices to select from.

    O  Received all of the RMD for 2022.

    O  I did not receive all the RMD for 2022.  (It should be worded "IN" 2022 instead of "for" to be more clear.)

    O  I was not required to take an RMD for 2022.

3-  Select the second choice "I did not receive all....."

4-  Enter "continue" and Turbotax will prompt with a screen which will acknowledge that they will solve this problem for you and will then provide a screen for you to type your explanation to the IRS for why you were late in receiving your RMD.

5-  Enter "continue" and Turbotax will automatically add and fill in for you form 5349 which you will not see unless you go to "Forms" and the 5329 form will appear with the last section f of the form filled in.

6-  Voilla.....All late RMD paperwork will be included in your efiled return without you having to manually print and mail in any returns or form 5329.  Not real clear on instructions from TT but once you fill in the 1099-R the process will be pretty smooth.  Who knew?  Even a TT representative on the phone could not answer this question on dealing with a late RMD, so I just started filling out the 1099-R anyway and this is what I found out.  Hope this helps.

[pratanas]

Where can I find form 5329 on the 2022 Turbo Tax?

[JamesG1]

IRS form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts has several purposes.  For what purpose do you need to use the form?

The form is invoked by the TurboTax software as it is needed.  For instance, the screen These Situations May Lower Your Tax Bill within IRA, 401(k), Pension Plan Withdrawals refer to IRS form 5329 Part I.

@pratanas 

[dragnet55]

I thought I had signed up to automatically get the distribution. I saw on January 5 that I hadn’t gotten it and had it taken out on January 6.

What if I put in the correct amount on my 1040 as if I had received the distribution in 2021, and then also include a 5329 when I file online? Can I fill the 5329 online with TurboTax, put RC on line 54, and submit? Or do I have to print out a 5329 and mail it in?

[dragnet55]

I thought I had signed up to automatically get the distribution.

[dragnet55]

...were on form 1040 do i add form 5329?

[AbrahamT]

Follow these instructions;

You must include form 5329 when you e-file and unfortunately this can only be done using the "Forms" mode which is only available with TurboTax CD/Download if you do not have a 1099-R to file.

You can change to TurboTax Basic CD/Download if you choose.

• How to switch from TurboTax Online to TurboTax CD/Download?

Once this is completed here are the steps to add Form 5329 to your return.

1. Enter the forms mode and click on open form (left). Type in 5329.
2. Choose 5329-T for the taxpayer (first person listed on your tax return), or 5329-S (for spouse - 2nd person on tax return)
3. Scroll down to Part IX line 52 and enter the RMD amount that should have been taken.
4. On line 53 enter the amount of the RMD that was actually taken (probably zero if it was missed).
5. Then in the box right under line 53 "Waver of Tax Smart Worksheet" enter the same amount as line 52 (the RMD amount). Then click the "Explanation" button and enter the reason for missing the RMD and your statement requesting a waver.

You will not pay any penalty now until the IRS determines if it will grant the waver, then they will inform you if you owe the penalty.