Am I being penalized 10% for a dividend received after age 59-1/2?

[chas1103]

Why am I being asked to file form 5329 for dividends I received from my retirement savings plan in 2023?  The 5329 instructions state that you can add the amount to line 8 of your 1040 return in lieu of filing form 5329. It looks to me like I have to pay a penalty even though I am well over 59-1/2. I went back to my 2022 TurboTax return and had entered the same information on that return, but the 5329 was never mentioned. I am somewhat confused as to whether I am being penalized or not. Does anyone have any information on the subject?

[VolvoGirl]

First go back to My Info and check your date of birth.  And if you are married be sure the 1099R is assigned to the right spouse.   @dmertz 

[chas1103]

The dates of birth and the 1099R are correct. I tried to go into the 1040-SR and edit the amount, but the program wouldn't let me override the "0". The dividend amount is only $100. I'll have to find out why I can't edit line 8 so I can eliminate form 5329.

Thank you for the reply.

[VolvoGirl]

What code is  on the 1099R in box 7 ? 

[dmertz]

What is the code in box 7 of the Form 1099-R that you have entered for this distribution?

Is the IRA/SEP/SIMPLE box marked?

Are you actually seeing a nonzero amount on Schedule 2 line 8?

Form 5329 is for reporting 9 different things that are subject to an additional tax.  Only one of these things is an early distribution from a retirement plan.

[chas1103]

The code is "U". The box is unchecked. There is a note on line 8: "Additional income from Schedule 1, line 10". The amount on line 8 is "0". (Schedule 1 or 2 are not listed on the forms list or on the "Records.pdf file".

I went back and looked at my 2022 tax and Schedule 1 is shown. It is just that I have never been asked about it while preparing previous returns.

It is just that I thought you weren't penalized after age 59-1/2. Apparently I am mistaken. The most it should cost me is 10 to 25% of $100. The dividend is automatically paid quarterly.

Thanks again,

[dmertz · Accepted solution]

TurboTax does not treat code U as being subject to an early distribution penalty regardless of your age.

With a zero on Schedule 1 line 8, no penalties are being assessed on Form 5329.

If you reached age 59½ during the tax year, TurboTax might ask if the distribution was made before or after age 59½, but your answer to this question is irrelevant to a code-U distribution.

[chas1103]

We are past 59-1/2 so that isn't the problem. The return shows an error that form 5329-T is not available and they will email me when it is. The error states "Form 1040 Individual, Form 5329-T, Additional Tax on Retirement Distributions" It also states that it will be available 01/24/2024 to file. The $101 does show on the form. I have gone back to the 1099R and I can't find anything that I missed. It doesn't ask if this is a RMD, but I will have to look back at past returns to see if there is a difference. Like I said before this has never been an issue before this year. I have looked at my estimated tax sheet and the figures agree with my original manual estimate. The form shows in the forms area as Form 5329 and states "DO NOT FILE" in red. Maybe TurboTax needs to address the problem. I can't be the only one with this issue.

Thank you for your reply.

[dmertz]

On what line of Form 5329 do you see the $101?

There are no substantial changes to Form 5329 for 2023, so there is little reason to suspect a calculation error.  Anything on the form would come from carryovers from your 2022 tax file or your entries into 2023 TurboTax.

[chas1103]

After really looking at form 5329, it is on line L, which states "incorrect early distributions". It is also under a heading "Distributions Not Subject to Additional Tax Smart Worksheet". It is in "Column A, Non SIMPLE Distributions". I think you are right, there is no penalty. I don''t know why it came up this year unless it is because the form isn't available yet. I looked back at 2022 and the form isn't even listed in the 2022_File Name-Tax Return_Filing.pdf., although it is listed in the unfinished 2023 Filing .pdf. If it is required, TurboTax will include it. As long as it isn't subject to a penalty it is already taxed on my return.

It looks like I wasted a lot of people's time. Sorry. As far as I am concerned the question is answered.

Thanks again to all who replied.