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

Forum|Forum|2 years ago
January 15, 2024
2 replies
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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?

Best answer by dmertz

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.

VolvoGirl

Employee

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

chas1103Author

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

Employee

What code is on the 1099R in box 7 ?

dmertz

Employee

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.

chas1103Author

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,

dmertzAnswer

Employee

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.