Common questions about Form 5329 Retirement Plan Taxes in ProConnect Tax

In this article, you'll find answers to frequently asked questions on Retirement Plan Taxes (Form 5329).

What's new for Form 5329 for tax year 2023:

• Certain corrective distributions not subject to 10% early distribution tax. Beginning on December 29, 2022, the 10% additional tax on early distributions will not apply to a corrective IRA distribution, which consists of an excessive contribution (a contribution greater than the IRA contribution limit) and any earnings allocable to the excessive contribution, as long as the corrective distribution is made on or before the due date (including extensions) of the income tax return
• Qualified disaster distributions. The additional tax on early distributions doesn't apply to qualified disaster distributions nor does it apply to qualified disaster recovery distributions. See Publication 590-B for more details.
• Maximum age for traditional IRA contributions. The age restrictions for contributions to a traditional IRA has been eliminated.

.

Table of contents:

How do I enter excess contributions on Form 5329, line 15?

1. From the Input Return tab, go to Taxes ⮕ Retirement Plan Taxes (5329).
2. Scroll down to the Excess Contributions to Traditional IRA section.
3. Enter the amount in 2023 excess contributions.

Back to Table of Contents

How do I enter a Roth IRA distribution so it is subject to the additional 10% tax on Form 5329?

Distributions from a Roth IRA are generally nontaxable. However, when a taxpayer converts basis from a Traditional IRA to a Roth IRA, the amount is taxable over a certain period after the conversion.

To enter a Roth IRA distribution with code J that is subject to the additional 10% tax, as calculated on the Form 5329:

1. From the Input Return tab, go to Income ⮕ Pensions, IRAs (1099-R).
2. Enter the Name of payer.
3. Open the Distribution code #1 dropdown menu.
4. Select distribution code J from the dropdown list.
5. Mark the checkbox for IRA/SEP/SIMPLE.
6. Enter the Gross Distribution amount.
7. From the Input Return tab, go to Deductions ⮕ Adjustments to Income.
8. Locate the Roth IRA section.
9. Enter in the Basis in Roth IRA conversions as of 12/31/21.
10. From the Input Return tab, go to Taxes ⮕ Retirement Plan Taxes (5329).
11. Enter the Year of distribution or conversion.
12. Enter the Taxable amount of conversion.

Should the Roth IRA already have a basis when the prior year conversion took place, enter the amount of that basis in Early Roth Distributions in the field Basis in conversion.

The above entries will prompt ProConnect to generate Form 8606 and Form 5239.

Back to Table of Contents

How do I generate Form 5329, Part III?

1. From the Input Return tab, go to Taxes ⮕ Retirement Plan Taxes (5329).
2. Scroll down to the Excess Contributions to Traditional IRA section.
3. Enter the Maximum contribution allowable less contribution made.
4. Enter the excess contribution made in 2023 excess contributions.
5. Enter the Total Value of the IRA.

Back to Table of Contents

How do I fill out the Paid Preparer information on page 2 of Form 5329?

The Paid Preparer information is not necessary when filing Form 5329 with your 1040. 

If you plan on filing the Form 5329 on its own, this can be indicated in Retirement Plan Taxes (5329).  Scroll down to the section titled Other.  Here you will see 1=not filing with Form 1040.  Enter a 1 in the Taxpayer and/or Spouse column.

Back to Table of Contents

Form 5329 Additional Taxes on Qualified Plans (Including IRAs), and Other Tax-Favored Accounts is not printing or generating

In the event that a return has multiple pension distributions in a selection to Suppress Form 5329 in any one distribution will suppress it for all.

Back to Table of Contents

The taxpayer's address is not printing on the top of Form 5329 Additional Taxes on Qualified Plans (Including IRAs), and Other Tax-Favored Accounts

The address is only required when Form 5329 is not being filed with Form 1040.  When filing separately, go to Retirement Plan Taxes and enter 1 in the field 1=not filing with Form 1040 to print the address on Form 5329.

Back to Table of Contents

How do I generate the Form 5329 Waiver Attachment

The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you're taking the necessary steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows:

1. Complete lines 52 and 53 as instructed.
2. Enter RC and the amount you want waived in parentheses on the dotted line next to line 54. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line 54.
3. Complete line 55 as instructed. You must pay any tax due that is reported on line 55.

The IRS will review the information and provide a decision on whether to grant your request for a waiver.

Follow these steps to generate a Form 5329 waiver:

1. Go to the Input Return tab.
2. On the left-side menu, select Taxes.
3. Click on the Retirement Plan Taxes (5329) screen.
4. Scroll down to the Excess Accumulation in Plan section.
5. Enter the Minimum required distribution for 20YY.
6. Enter the Amount actually distributed in 20YY.
7. Enter the Amount of RMD shortfall to waive.
8. Enter the Taxpayer waiver explanation or Spouse waiver explanation.

All four of these entries are required in order to generate the waiver. ProConnect Tax Online will complete Form 5329 as instructed, printing RC and See Att next to line 54 of the form. The waiver attachment will print as page 3 of Form 5329, and be e-filed with the tax return.

Back to Table of Contents