In article <4306e809-be6d-4f19-b021-b7abc22c63e3[at]p2g2000prf.googlegroups.com> ,
<rck9876[at]yahoo.com> wrote:
- quote -


The 1099R codes are the issuer's best guess. They might not have
known of the disability. If disability really applies, (doctors note)
then code the 5329 as code 03 not code 1 and exlude the entire
distribution from early distribution tax. (I wrote 03 from
memory -- check to see it is the disability code.
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ArtKamlet at a o l dot c o m Columbus OH K2PZH

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My wife cashed in a traditional IRA and Roth IRA in October 2008 (We
are both under 55). She is disabled and has been receiving social
security disabliity since August 2008. Her IRA distribution was $800
on the 1099R (she actually received $790 with $10 fee charged by the
IRA adminstrator), and her Roth IRA distribution was $850 (she
converted an IRA to Roth in 1999 with $650 conversion amount).
However, she neglected to tell her IRA adminitrator that she was
disabled, so the traditional IRA 1099R shows code 1 (early distribtion
with no exception), and the Roth IRA 1099R shows code J (early
distribiton with no exception). I read pub 590 and the form
instructions. As far as I can tell, if we treat these early
distribution with no exception, we'll need to file both form 5329 and
8606. Here is what I figured

Form 8606 - to report early Roth IRA distribtion:
line 19 - $850 distribtion
line 22 - $150 contribution in 2000 and 2001
line 34 - $650 conversion basis from traiditonal IRA to Roth IRA in
1999
line 25c - $50 taxable amount to include in form 5329 (for 10%
penalty) and form 1040 15b (for income)

Form 5329 - to report early IRA and Roth IRA distribution penalty
line 1 - $850 - $800 from traditional IRA and $50 from Roth IRA (line
25c form 8606)
line 2 - $0 - since the traditional IRA 1000R shows code 1 and Roth
1099R shows code J
line 3 - $850 net amount
line 4 - $85 - 10% penalty to include on form 1040 line 59
end of form 5329 input

So, on form 1040, line 15a would show $1,650 (800 IRA, 850 Roth), line
15b would show $850 (same as $ on form 5329 line 3, $800 for IRA, $50
for Roth) and line 59 would show $85 (10% of the $850 on form 5329
line 3).

Are my calculations correct?

Another question is, can we claim disablility even though the 1099Rs
show code 1 and code J? On form 5329 line 2, it says to put on
exception code. If I put in code 3 for traditioanl IRA disability (my
wife is receiving social security disability, so I assume that she is
qualified as permanently disabled). If I do that, what amount should
I put on form 5329 line 2 - Is it $800 for IRA and $50 for Roth = $850
(so the penalty is 0), or is it just the traditional IRA distribution
of $800 (so the only penalty is 10% of the $50 earnings from Roth =
$5)?

Also, I assume that regardless of disability, both IRA distribution of
$800 and Roth IRA earnings of $50 are still taxable, so the 1040 line
15b is still $850?

Thank you for your help in advance.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >