I need help with my tax. It is a very simple question but when I go to look up the answer, I am taken to various publications and instructions
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The $306 must be included in your gross income, and you must file Form 5329 for the additional 10% tax.
IRS Pub 590's "Are Distributions Taxable?" section explains that "You generally do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s)."
The example in "Additional 10% tax" on page 54-55 is almost your case, except that you have a Roth IRA and only need to tax the gains ($306): Tom Jones, who is 35 years old, receives a $3,000 distribution from his traditional IRA account. Tom does not meet any of the exceptions to the 10% additional tax, so the $3,000 is an early distribution. Tom never made any nondeductible contributions to his IRA. He must include the $3,000 in his gross income for the year of the distribution and pay income tax on it. Tom must also pay an additional tax of $300 (10% x $3,000). He files Form 5329.
This is what I thought, but on my 1099 from the bank, it lists 806 on the line marked Taxable Income. Being somewhat verses in accounting, I know that I have paid taxes on that money already and should not be subject to tax again. I think my biggest questions really is what forms do I need to fill in the blanks on. I looks at the 5329 and 8606 and there was so many different things on it, it was very confusing.
I just got off the phone and I was told that I will claim 306 as taxable income and 30.60 as the 10% penalty entered on line 58. I have to attach forms 5329 and it looks like 8606 as well. I think I'm actually going to be getting money back instead of owing now, thanks to the lower penalty amount and the Making Work Pay credit.
Ah, Form 8606 Part IV also. Thanks for the catch. This is way too complicated for something so simple. Your bank should have gotten your statement right, too, but owing tax on your full $806 wouldn't have surprised me with all the IRA rules.
It's great that you're getting money back. I actually try to owe under the penalty limit of $1000 so I can put that money to good use last year instead of now.
The Distribution Code is 1 (Box 7). P.S. I have spoken with a lady from the IRS about it and she said it is only 306. However, it sounded like she was just reading from a troubleshooting guide. She kept asking me all these stupid irrelevant questions about other IRA stuff and I made it quite clear in the beginning that I have no other account and made an unqualified distribution.
I once spent 45 minutes troubleshooting an AT&T Internet connection with a level 1 tech after I informed her 3 times that the dog dug up the fiber optic cable and chewed through it. They are really really good at following troubleshooting flowcharts.
Turn it off, wait 30 seconds and then turn it back on again? No, the dog chewed through the cable outside. Ok, click on Firefox and tell me what it says. No, the dog chewed through the cable outside. Try clearing your cookies. No, the dog chewed through the cable outside. Let me send a signal to your box. No, the dog chewed through the cable outside. Well, it looks like I'm not getting a signal, there must be a problem with the line. Yes. A dog chewed through the cable outside. Ok, well we can send someone out 2 months later between 8 AM and 2PM, would you like to make that appointment?
Then they get there and say, well there's no problem in your apartment, there must be a problem outside. Oh a dog must have dug it up and chewed the cable. Why didn't you just say something? We would have just come right away.
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IRS Pub 590's "Are Distributions Taxable?" section explains that "You generally do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s)."
The example in "Additional 10% tax" on page 54-55 is almost your case, except that you have a Roth IRA and only need to tax the gains ($306): Tom Jones, who is 35 years old, receives a $3,000 distribution from his traditional IRA account. Tom does not meet any of the exceptions to the 10% additional tax, so the $3,000 is an early distribution. Tom never made any nondeductible contributions to his IRA. He must include the $3,000 in his gross income for the year of the distribution and pay income tax on it. Tom must also pay an additional tax of $300 (10% x $3,000). He files Form 5329.
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I just got off the phone and I was told that I will claim 306 as taxable income and 30.60 as the 10% penalty entered on line 58. I have to attach forms 5329 and it looks like 8606 as well. I think I'm actually going to be getting money back instead of owing now, thanks to the lower penalty amount and the Making Work Pay credit.
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It's great that you're getting money back. I actually try to owe under the penalty limit of $1000 so I can put that money to good use last year instead of now.
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What is written in box 7 of the 1099-R?
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No, the dog chewed through the cable outside.
Ok, click on Firefox and tell me what it says.
No, the dog chewed through the cable outside.
Try clearing your cookies.
No, the dog chewed through the cable outside.
Let me send a signal to your box.
No, the dog chewed through the cable outside.
Well, it looks like I'm not getting a signal, there must be a problem with the line.
Yes. A dog chewed through the cable outside.
Ok, well we can send someone out 2 months later between 8 AM and 2PM, would you like to make that appointment?
Then they get there and say, well there's no problem in your apartment, there must be a problem outside. Oh a dog must have dug it up and chewed the cable. Why didn't you just say something? We would have just come right away.
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