Do I Need to Fill Out Form 5329 for Non-Taxable Roth IRA Distribution?

But what if the 1099-R has the wrong code in box 7? Mine has code J but I think it should be Q for qualified distribution. Do I need the 5329 then to explain?

If your 1099-R shows the wrong distribution code, you don't necessarily need Form 5329 to correct it. When you enter the 1099-R information in TurboTax, you'll have the opportunity to indicate that it's a qualified distribution regardless of the code on the form. TurboTax will ask you questions about your age and how long you've had the Roth IRA to determine if your distribution qualifies. If it determines your distribution is qualified, it will handle the reporting correctly without requiring Form 5329.

Does it work with other retirement account distributions too? I have both Roth and traditional IRAs and I'm planning to take distributions from both next year.

Sounds interesting but how accurate is it really? I've used tax software that misses things. Can it actually interpret the tax codes correctly for complicated situations?

Yes, it handles all types of retirement accounts including both traditional and Roth IRAs, 401(k)s, and other qualified plans. It's particularly helpful when you're dealing with multiple types of distributions in the same tax year. As for accuracy, I was skeptical too at first. What impressed me was that it doesn't just give generic advice but actually looks at your specific documents. It caught a mistake in how my brokerage coded my distribution that even my tax software initially missed. It references the actual IRS tax code sections that apply to your situation.

How does this actually work? Do they just call for you or what? I've literally never gotten through to a real person at the IRS.

Yeah right. Nobody gets through to the IRS these days. I've tried calling multiple times for weeks about my Form 5329 questions and always get the "high call volume" message. Not buying that any service could actually get through.

They don't call for you - they use technology to navigate the IRS phone system and secure your place in line. When they get close to an agent, they call you and then connect you directly to the IRS. It's basically like having someone wait on hold for you. The system actually calls you when it's your turn to talk to an agent. I was super skeptical too, but it worked exactly as advertised. I didn't have to sit on hold for hours - I just went about my day until I got the call that an agent was ready to talk.

What about if you're taking substantially equal periodic payments (SEPP/72t distributions)? Do those require Form 5329 even though they're exempt from the penalty?

For 72t/SEPP distributions, you do need to file Form 5329 even though you're exempt from the 10% penalty. You'll report the early distribution on Form 5329 and enter exception code "02" to show you're taking substantially equal periodic payments. This is important documentation to maintain for the IRS because if you break the SEPP plan before the required timeframe (generally 5 years or until age 59½, whichever is longer), you could face retroactive penalties on all previous distributions.

I always get confused between these forms! Which one do I use if I'm taking out contributions early but not earnings?

Great point about Form 8606! For Roth IRAs, you generally don't need Form 8606 since Roth contributions are made with after-tax dollars. Form 8606 is mainly for traditional IRAs with non-deductible contributions. @Oscar O'Neil - If you're withdrawing Roth contributions early (but not earnings), you typically don't need either Form 5329 or 8606. Roth contributions can be withdrawn anytime without taxes or penalties since you already paid tax on that money. You only run into issues if you withdraw earnings before meeting the qualified distribution requirements. The key is making sure your brokerage properly tracks what portion of your distribution is contributions versus earnings on your 1099-R.