Discussion:Exception to penalty on retirement

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Discussion Forum Index --> Tax Questions --> Exception to penalty on retirement

TLF (talk|edits) said:

7 November 2006
Client came in with his parents 2005 tax return that was prepared by a CPA firm. Married couple filing jointly, wife recieved 1099R for $ 66000.00, the preparer did not figure the 10% penalty and did not fill out form 5329 with an exception and now IRS sends a bill for over $ 6000.00. In 2003 the wife was 54 years old and she went from working as a teachers aid to becoming a teacher. She worked at the same school, but changed positions, retirement plans and unions. Now in 2005 she turned 56 and recieved the 1099r from her old job. Does she meet the exception of beign separated from service on or after age 55 since she didn't recieve the

money until she was 56?

WesR (talk|edits) said:

7 November 2006
Hi, BOTH the separation from service and the distribution must be on or after 1/1 of the YEAR the employee reaches age 55 (2004 in your case). Publication 575 page 32. You are dodo out of luck. 72(t)(2)(A)(v) actually states BOTH must occur after REACH age 55. bye

TLF (talk|edits) said:

7 November 2006
Thanks for the help.

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