5329 for exemption on 10% early withdrawal tax...

Forum|Forum|1 year ago
March 28, 2025
1 reply
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I had to remove an excess contribution to my Roth, and after importing the 1099-R, TT informed me that I would be hit with an additional 10% early withdrawal penalty.

After doing some research I was informed that I can request an exemption for this penalty by filing a "5329".

Can anyone explain the steps for how this is done inside of TT?

Thanks!

MAK70

The SECURE 2.0 Act of 2022 removed the 10% early withdrawal penalty on earnings removed with excess contributions for IRA owners under 59.5. If you answer the questions in TurboTax for the 1099-R, it will remove the penalty on Form 5329.

taxunAuthor

Ok thanks I will have to run through it all again... I recall one screen where it gave me a list of options for 'why did you remove from the Roth', but none of the reasons were 'Removal of Excess'. So on the next screen it let me type in a reason, so I typed 'Removal of Excess'. But it still warned me about the 10% penalty.

I will remove the 1099-r and restart form the beginning. Is there anything particular/a particular screen I need to look out for when going through the process again?

*btw - When TT asks about Roth contributions/removals, am I supposed to even be entering anything manually? Or should I leave it at ZERO (since in my case, 7000 was put in, and 7000+earnings was removed, which is all reported on the 1099-r).

DanaB27

If you are talking about the net contribution prior to 2024 questions after you entered all Form 1099-Rs then you will only enter contribution that are still left in the Roth IRA.

If you are referring to the IRA contribution interview, then you can enter $0 for Roth IRA contributions since you withdrew them all. Another option is to enter the Roth IRA contribution and then enter on the penalty screen that you withdrew the excess contribution by the due date.

To get the exception from the 10% penalty:

Click on the "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Enter Form 1099-R
Click "Continue" after all 1099-R are entered and answer all the questions.
Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

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