Discussion:10% penalty on retirement distribution - wrong code

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Discussion Forum Index --> Basic Tax Questions --> 10% penalty on retirement distribution - wrong code
Discussion Forum Index --> Tax Questions --> 10% penalty on retirement distribution - wrong code

Steph (talk|edits) said:

17 March 2008
Hello,

I have a client who withdrew funds from his retirement account to purchase his first home. While he needs to pay tax on the distribution, he should not be subject to the 10% penalty. Unfortunately the 1099-R indicates "early distribution - no known exception". If I just file the return and tell Lacerte this is not subject to the 10% penalty won't the IRS issue a tax due letter? Is there anywhere on the return I can indicate that the distribution meets the criteria for no penalty? I reviewed other discussions and saw indications that that could be done on form 5329 but in reviewing the form I'm not seeing where I would show this.

Thanks in advance for any help/suggestions.

Steph

Taxestaxes (talk|edits) said:

17 March 2008
ON FORM 5329, line 2, part 1 - enter proper code for exception....if you are using software it will have a drop down box to select proper reason.

Steph (talk|edits) said:

17 March 2008
Duh Duh DUH! I am so sorry - I looked at the form five times and focused on the fact that the headers said "additional tax due" without reading the lines carefully!

Thanks for the help - I now return to filing extensions.

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