Tax Questions

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L1: Tax QuestionsLast year at age 51 I rolled a 401k to an IRA and started a SEPP 72T. One of the 1099’Rs I received had a code of “U” in Box 7 showing the ESOP dividends that were not eligible for rollover. The 1099R for the 72t has a distribution code of “1”.
When I file my Form 1040, on Line 15a would I show the total amount of the rollover plus the ESOP dividends plus the 72T distribution? On Line 15b would I just show the 72t distribution plus the ESOP dividends?
On Form 5329, it looks like Part 1, Line 1 would be the total of the 72T distribution and the ESOP dividends. Line 2 would be the same amount as Line 1 with an exception code of “12”? I understand for the 72T I would use an exception code of “02” and it appears for the ESOP Dist it is an exception code of “12” for Other. In reading the instructions it shows to also use an exception code of “12” if there is more than one exception. Does this sound correct? It looks like I file only one 5329 with the exception code of ’12” but there is no place to include a breakdown of the two exceptions. I’m concerned I will get flagged for not showing the exception “02” for the 72T.
Thanks in advance for your help.
2012-03-22 15:11, By: Mule, IP: [98.156.75.241]

L2: Tax QuestionsThe 1099R you received from the employer plan is totally separate from your IRA 1099R.
The ESOP dividends have their own penalty exception in Sec 72, and you will note that the 1099R with the Code U does not also show Code 1. You will report the ESOP dividends on line 16a and 16b of Form 1040 and Form 5329 should not refer to these dividends.
Your SEPP 1099R from the IRA custodian is coded “1” which is typical for IRA custodians that choose not to recognize the SEPP. This is where you need the 5329 to change the 1 to exception “02”. On line 1 of Form 5329 show only the IRA distribution, not the dividends. For the IRA distributions on Form 1040, use lines 15a and 15b.
This will alleviate your concern because you will not show Code 12, just the “02” on line 2 of Form 5329.

NOTE: I just noticed another post of yours that indicates you also received 5,000 of after tax contributions from your plan, and did NOT roll them over to the IRA. Since this 5,000 also goes on line 16a along with the 401k pre tax distribution you rolled to the IRA and the ESOP dividends on the 1099R, you will total all these for 16a. 16b will show only the amount of the dividends and “rollover” next to 16b that tells the IRS that you rolled over the pre tax 1099R to the IRA.2012-03-22 17:45, By: Alan S, IP: [24.116.67.233]

L3: Tax QuestionsThank you so much for pointing me in the right direction on this issue (as well as noticing and also addressing my previous post). I can finally finish my taxes with confidence they are correct. I can’t thank you enough for this great website!2012-03-22 18:41, By: Mule, IP: [98.156.75.241]