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Taxpayer filed 2017,never turned in 1099R income to purchase a home first time.I need to amend her return her total not reported was 18234.00.

jannett90044
Level 4

Taxpayer did not report the income used from her 401k to purchase a home first time in the amount of 18234. I am amending her return and adding form 5329. To my understanding only the first 10k is included as income. Is that correct and if so do i exclude the remaining 82334 on form 5329 . Sorry first time dealing with these specific form. for 2017 return

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Just-Lisa-Now-
Level 15
Level 15

It's ALL taxable income, as long as its from an IRA, not a 401K, you can exclude the 10% penalty for early withdrawal on the first 10K.  

That's all the breaks you get is the early withdrawal penalty exception up to the first 10K in distribution.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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Just-Lisa-Now-
Level 15
Level 15

It's ALL taxable income, as long as its from an IRA, not a 401K, you can exclude the 10% penalty for early withdrawal on the first 10K.  

That's all the breaks you get is the early withdrawal penalty exception up to the first 10K in distribution.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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Just-Lisa-Now-
Level 15
Level 15
That happens on the Form 5329 Smart Worksheet below Line1 , see line I...First Time Home Purchase

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Just-Lisa-Now-
Level 15
Level 15
If it was a 401K, no breaks, its all taxable and all subject to penalty.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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sjrcpa
Level 15

Didn't she get a matching notice from IRS?


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jannett90044
Level 4
She received a letter from the Irs stating she did not report her income.  Also she called the irs and the agent requested form 5329,and she was told she would only be penalized for the remainder amout after the 10k. Which is the 8239
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Just-Lisa-Now-
Level 15
Level 15
She misunderstood then....all income taken from a 401k is taxable....only IRA's are eligible for penalty exception for first time home buyers.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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jannett90044
Level 4
Ok thank you , where can I find these information to explain it to me client.
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Just-Lisa-Now-
Level 15
Level 15
The Motley Fools explains it pretty well here
https://www.fool.com/retirement/iras/for-first-time-home-buyers.aspx

This one is pretty straightforward to read...but its got annoying ads on the side
https://homeguides.sfgate.com/first-time-homebuyer-401k-withdrawal-46922.html

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Just-Lisa-Now-
Level 15
Level 15
Had she taken a loan from the 401K then it wouldn't be taxable unless she defaulted on the loan.  But if a 1099R was issued, then it wasn't a loan.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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jannett90044
Level 4
Hi Lisa I just finished telling my client and she is not believing what I am saying , and says the irs agent Said it was okay for 401k. Any advice . 😞
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sjrcpa
Level 15
Do you have the IRS Letter? The correct response may not involve an amended return. They hve probably alreday billed for the income tax and penalty. They may really only want the 5329, but if it is all subject to the 10% there may be nothing to do except have the client pay it.

ex-AllStar
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sjrcpa
Level 15
Does she have the agents name and ID number? Did she get it in writing? :laughing: That's the only way you can rely on what IRS employees ttell you.:laughing:

ex-AllStar
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jannett90044
Level 4
Great thank you for the links she finally understood
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