Question

I have a 1099-R for less than $10. Because of this TurboTax will not allow free filing. How can I avoid paying an extra $60 because of this <$10 distribution?

Forum|Forum|6 years ago
March 22, 2020
2 replies
0 views

$9.62, $1.92 withheld - '1-Early distribution'. I believe it was late interest on an account I had closed w/ direct rollover in 2018. I was sent a check out of the blue, no option to rollover or anything.

TurboTax Free Edition Online

macuser_22

Employee

The TurboTax Free edition only supports simple tax returns that do not require any additional schedules. More complex tax returns will require Deluxe or higher depending on the forms that are needed.

You might be able to use the Free File (formally called Freedom Edition) for incomes under $36,000 and supports all states and most forms.

The Free File is part of the IRS Free File alliance and is totally separate from TurboTax website.

You can also access the Free File tax alliance programs via the IRS website.

https://apps.irs.gov/app/freeFile/

https://freefile.intuit.com/

How do I switch to TurboTax Free File?
https://ttlc.intuit.com/replies/3491786

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

D

dmertz

Employee

If you don't qualify to use the Free File Program, if you want to use TurboTax you'll need to use a paid version to be able to file Form 5329 to report the $1 early-distribution penalty.

You did have the option to indirectly roll this distribution over.

J

john_stricklerAuthor

No, I did not have the option. I had done a direct rollover of the 401k in 2018. There was interest, dividends, error, or something, and I was sent this check and 1099-R in 2019 with no notice or opportunity to select the type of distribution.

D

dmertz

Employee

Right. Even though the plan did not provide an option to do a direct rollover, you still had the option to indirectly roll the distribution over and avoid the $1 penalty. Most people probably would not consider $10 in taxable income and a $1 penalty to be worth doing such a rollover, but as you found, there is a side effect of being required to use a paid version of TurboTax.

Although I don't generally recommend knowingly filing an inaccurate tax return because when you sign your tax return you are attesting that the tax return is accurate to the best of your knowledge, an alternative might be to file your tax return without reporting the $10 distribution and then amending by filing Form 1040-X to report the additional income (perhaps changing income tax slightly, but unlikely) and the $1 change to Other taxes. Since the entire distribution is subject to penalty, the penalty can be reported directly on Form 1040-X with no Form 5329 needed (although you might include Form 5329 anyway, it wouldn't hurt).