Form 5329

[Nafasjalal]

Hello,

When I first got hired in 2024, I worked for a month and a half and then resigned. After a few months, I received a check from Fidelity for about $500. A few days ago, I received Form 1099R. I found out that I had to pay a $1,000 penalty for early withdrawals, which I had not requested, and because the amount was less than $1,000, it was settled with me. Is that correct? If so, do I also need to fill out Form 5329? If so, how do I get this form?

[MaryK4]

No, there should not be a penalty for early withdrawal from Fidelity- you should contact them directly if you are not sure.  In most cases, the 401k has a minimum account balance (the $1,000), and because your balance was below that, they closed the account and sent you the balance (the $500).  You would have to pay the penalty for early withdrawal to the IRS if you did not rollover the $500 to another 401k or IRA so you will need to file the Form 5329.   TurboTax will automatically generate this if you go through the questions in the 1099-R section.  

[DoninGA]

The early withdrawal penalty from a tax deferred retirement account is 10% of the withdrawal.  If your withdrawal was $500 then the penalty assessed on your tax return is only $50 and entered as a tax liability.

[dmertz]

I think you meant to say that $100, not $1,000, was withheld for tax withholding.  This is simply a down payment toward your tax liability and, although the payer calculated it from the gross-distribution amount, does not apply to any particular item of income on your tax return.  It is credited to you on Form 1040 line 25b.