The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: K-1 Section 751 statement||Date: 2/26/2009 10:05 AM|
|Author: drippinfool||Number: 104743 of 123001|
"The 5329 instructions have conflicting bullets in the "Who Must File?" section. One is the bullet you mentioned, which says that a 5329 is required if you got an early distribution and box 7 didn't have code 1. The next two bullets are in direct contradiction, saying that if a penalty exception applies and the code is not 1 you don't need to file the 5329. I can't imagine how you got confused.
Here's the "trust me, this is how it works" explanation. A code 1 on box 7 means you took a premature distribution subject to the 10% penalty. Code 2 means you took a premature distribution not subject to the penalty. If the box 7 code is correct, no 5329 is required. When you e-file the software will correctly include the penalty for code 1 and exclude the penalty for code 2. Since I retired early my 1099-R for years had code 2 until I reached normal retirement age. IIRC software warned me to make sure I met the exception, but processed everything correctly. I've never filed a 5329 and never had an inquiry from IRS.
Assuming you meet a penalty exception, you don't need to file a 5329 with your return. If you want to file one anyway, that form can be filed by itself. Just download the form, fill it in, correctly please, and send it on its own.
First, thanks for your patience and perseverence.
Second, no wonder I got a "scratching our collective heads" letter from the IRS when I sub