topic IRS form 5329 during withdrawal of excess contribution from traditional IRA in Retirement tax questions

IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Sat, 28 Mar 2020 20:57:28 GMT

Reg 5329 , I am not able to see that form in my TurboTax Delux Software, if someone can guide me where I can see it.

I am 40 year old and have deposited $5500 into my wife traditional IRA account in ~Dec 2019 for 2019 year contribution, but due to total gross salary exceeded its limit, I cannot take tax advantage on that deposit, so requested to withdraw [ non-deductable / excess contribution]. Fidelity sent me excess contribution amount $5500 and earnings [ $11.05 ] along with a letter suggesting that I may need to file form 5329, and Fidelity will send my 1099-R form in Jan 2021. I think I have to file this withdrawal in 2019 tax filling, right ? Can I file TAX online using TurboTax Delux or I have to file tax paper base due to the form 5329? If online I can file, then where I can find this form in Turbo TAX Delux SW, as not seeing it anywhere in TurboTax Delux software.

Note: My wife is working part time and her employer doesn't cover "Retirement Plan at Work", so I created her traditional IRA account. My employer does has "Retirement Plan at Work".

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

macuser_22 — Sat, 28 Mar 2020 21:12:43 GMT

See your other question:

https://ttlc.intuit.com/community/retirement/discussion/re-do-not-pay-any-penalty-the-irs-almost-never-denies-t/01/1373422#M98362

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Sat, 28 Mar 2020 22:16:35 GMT

Thank you macuser_22, best ans so far.

I have few more questions on the same line. While filing 1099-R form on Turbo-Tax seeing, below field not sure what to select

1. box 2b check box ??

2. box 7: selected 'P' , below that seeing one more drop box where I am able to find "8-Return of contribution taxable in 2019" , should I also select that ?

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

macuser_22 — Sat, 28 Mar 2020 23:34:46 GMT

@Kmalesh wrote:

Thank you macuser_22, best ans so far.

I have few more questions on the same line. While filing 1099-R form on Turbo-Tax seeing, below field not sure what to select

1. box 2b check box ??

2. box 7: selected 'P' , below that seeing one more drop box where I am able to find "8-Return of contribution taxable in 2019" , should I also select that ?

#1 No. 2b does not apply

#2 No. Code P is correct. It was a 2019 contribution returned in 2020. (Code 8 is for a 2019 contribution returned in 2019 and you would already have the 1099-R if returned in 2019.)

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Sun, 29 Mar 2020 00:31:16 GMT

Awesome thank you so much.

After filling 1099-R seeing that Turbo-tax generated 8606 form "Nondeductible IRA", looks like this is correct, but Fidelity letter that I have received that indicates I may need to file IRA form 5329 with my tax return. Do I have to file 5329 or 1099-R [8606] is sufficient ? if needs to file 5329 then how can I do it in Turbo-Tax Delux if you can guide ?

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Tue, 31 Mar 2020 01:28:09 GMT

Yesterday I reply to you about not able to find form 5329 and Turbo tax created form 8606. Looks like Turbo tax SW by default doesn't have 1040 schedule 4 [ which might have entries from 5329 ] , right ? Any way to get from 5329 and 1040 schedule 4 ? I have Delux. Appreciated your all reply and info.

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

macuser_22 — Tue, 31 Mar 2020 02:18:34 GMT

The 5329 form would only be necessary if box 2a reported taxable earnings and you are under age 59 1/2, the the returned earnings are not only subject to ordinary tax but an additional 10% early distribution penalty for being under age 59 1/2. That should be automatically produced.

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Tue, 31 Mar 2020 04:22:20 GMT

True, in my case it is not generating 5329 form , so one possibility is that the. earning in not taxable [ only $11.5 ] or technical issue with Turbo tax SW, as I am under 59.

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

macuser_22 — Tue, 31 Mar 2020 05:01:31 GMT

What code is on box 7 on your 1099-R?

If under age 59 1/2 the code should be P1 or 81.

A 5329 is probably not required but there should be a Schedule 2 with the $1.00 of tax on line 6 and a "NO" a 5329 is not required (5329 is not always required to report the tax).

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Tue, 31 Mar 2020 21:07:35 GMT

Box 7: 81 [ It might come with P1 in Jan 2021 1099-R , but looks like for reporting in 2019 I have to use 81 ]

Thank you, seeing "Schedule 2 with the $1.00 of tax on line 6 " .

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

macuser_22 — Tue, 31 Mar 2020 21:14:35 GMT

@Kmalesh wrote:

Box 7: 81 [ It might come with P1 in Jan 2021 1099-R , but looks like for reporting in 2019 I have to use 81 ]

Thank you, seeing "Schedule 2 with the $1.00 of tax on line 6 " .

I think I have repeated the same thing 3 times now - a 2019 contribution returned in 2020 MUST have a code *P1* in box 7 NOT 81. The interview question that it

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Tue, 31 Mar 2020 21:45:46 GMT

Thank you, you are champ.

Last question, where can I see similar entries [ 10% penalty, tax on IRA earning ] in CA state text ? Any form I need to file ? Mostly Turbo tax should automatically generate it based on my 1099-R entry, right ?

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

macuser_22 — Tue, 31 Mar 2020 22:03:55 GMT

CA requires a copy of the Federal return be attached to the CA return. CA uses that and only has certain adjustments to the Federal form.

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Mon, 13 Apr 2020 18:36:37 GMT

Hi Champ,

As we discussed above that I have to enter code '8' & '1' in Box 7 for my 1099-R [ Which haven't received and will come in Jan 2021 with 'P' '1' codes].

Turbo Tax, Smart Check is asking me to fix error:

Check This Entry

Form 1099-R (Fedility Investments): Box for 2019 Form 1099-R should not be checked unless there is a code 'P' or code 'R' in box 7.

Checkbox selected : code P box

Should I ignore this Turbo Tax warning ?

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

Kmalesh — Mon, 13 Apr 2020 18:40:31 GMT

Please discard my previous ask, as found the answer. Even though box 7 code 81 looks correct I have to select code 'P1'. update me if my understanding is not correct ?

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

littlek49 — Tue, 02 Jun 2020 16:32:21 GMT

my spouse took out more than the RMD in 2019. Do we need Form 5329 and if so where do I get the information to enter onto the form?

Re: IRS form 5329 during withdrawal of excess contribution from traditional IRA

macuser_22 — Tue, 02 Jun 2020 17:28:04 GMT

@littlek49 wrote:

my spouse took out more than the RMD in 2019. Do we need Form 5329 and if so where do I get the information to enter onto the form?

No. The penalty is of you took *less* than the RMD. You can always take more than the RMD including the entire value of the IRA.

And the topic of this thread is about excess contributions that has nothing to do with a RMD.