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bamartindale87
Level 1

IRA Early Distribution Codes for First Time home buyer - Form 5329

If I have a an early distribution from my traditional IRA that is exempt because I'm a first time home buyer, does TurbotTax automatically create a Form 5329 upon submitting my taxes. Also, what codes should I use in TurboTax since my 1099 has a code 1, but when I go through the questions, it doesn't ask me anything about first time home purchase. 

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Accepted Solutions
dmertz
Level 15
Intuit Approved! This answer has been verified for accuracy by an Intuit expert employee

IRA Early Distribution Codes for First Time home buyer - Form 5329

TurboTax will automatically prepare Form 5329 claiming a code 09 exception on line 2 when you enter a code 1 Form 1099-R from a traditional IRA and you indicate that some or all of the distribution was used to purchase a first home.  In the follow-up to entering the Form 1099-R details, be sure to indicate the amount that was applied to your first-home purchase.

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5 Replies
dmertz
Level 15
Intuit Approved! This answer has been verified for accuracy by an Intuit expert employee

IRA Early Distribution Codes for First Time home buyer - Form 5329

TurboTax will automatically prepare Form 5329 claiming a code 09 exception on line 2 when you enter a code 1 Form 1099-R from a traditional IRA and you indicate that some or all of the distribution was used to purchase a first home.  In the follow-up to entering the Form 1099-R details, be sure to indicate the amount that was applied to your first-home purchase.

bamartindale87
Level 1

IRA Early Distribution Codes for First Time home buyer - Form 5329

@dmertz I thought for first time home buyer a code J was needed. On my 1099 they defaulted a code 1 in box 7, but told me it can be changed based on what it was used for. Which code should I be using in that box? I thought TurboTax said use code J here and when I did that, I was asked about first time home buying. When I first tried to use code 1, I didn't get any questions about first time home buying and I saw where they immediately took taxes and penalty out of my return. 

bamartindale87
Level 1

IRA Early Distribution Codes for First Time home buyer - Form 5329

@dmertz I should also point out that this is a rollover IRA, not Roth, so maybe J isn't the right choice here to pick. 

SteamTrain
Level 15

IRA Early Distribution Codes for First Time home buyer - Form 5329

@bamartindale87 

 

With the code 1, the TTX software does cover the first-time Homebyer's exception to the penalty if

1)  You make sure the IRA/SEP box is checked in the main form

2)  You continue thru any following pages out to the main table of 1099-R forms.

3)  You hit the "Continue" button at the bottom of the page when you do get to the table of 1099-R forms already entered.

4) Then you will step thru a bunch of Disaster related exceptions, before you finally get to a big list of other penalty exceptions...one of which is the particular one you want.

 

(at least, that is the progression in the desktop software...I don't have an Online test account with an appropriately aged person to test the exact progression there...but it should be similar )

 

Remember that it is only an exception to the penalty, not to any income tax on the distribution

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
dmertz
Level 15

IRA Early Distribution Codes for First Time home buyer - Form 5329

Right, code J is only for early distributions from Roth IRAs, not for distributions from traditional IRAs like your rollover IRA.  My answer assumed that the early distribution was from a traditional IRA, which you have now confirmed.

 

And no, they won't change the code in box 7.  Whoever told you that is misinformed.

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