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5329

Form 5329

Additional Taxes on Qualified Plans and Other Tax Favored Accounts

PURPOSE OF THE FORM:

Use Form 5329 is used to report additional taxes on:

  • Individual retirement arrangements (IRA’s).
  • Other qualified retirement plans.
  • Modified endowment contracts.
  • Coverdell ESA’s.
  • Qualified tuition programs (QTP’s).
  • Archer MSA’s.
  • Health Savings Accounts (HSA’s).

Amended Return:
If you are filing an amended return 2006 Form 5329, check the checkbox given below address.
Do not use the 2006 Form 5329 to amend your return for any other year.

PART-I: Additional Tax On Early Distributions

Part -1 calculates the tax on early distributions from Qualified Retirement Plans, IRA’s , or Modified Endowment Contracts.
In general, if you receive an early distribution(including an involuntary cash out from an IRA, Other Qualified Retirement Plan or modified Endowment contract, the part of the distribution included in income is subject to an additional 10% tax. But refer the exceptions for ROTH IRA distributions in Form 5329 instructions.

Line 1:
Early distributions included in gross income is calculated on this form based on information entered on FORM 1099-R, or FORM 8606.
For details refer the instructions of FORM 5329.

Line 2:
Enter on this line the amount that can be excluded. In the space adjacent select from the combo box the applicable exception number.

Line 4:
If any amount on line 3 was a distribution from a SIMPLE IRA received within 2 years from the date you first participated in the SIMPLE IRA plan, you must multiply that amount by 25% instead of 10%. These distributions are included in boxes 1 and 2a of form 1099-R and are designated with codes S in box 7.

PART-II: Additional Tax on Certain Distributions from Education Accounts.
Part -2 calculates any additional tax on distributions from Coverdell Education Savings Accounts (ESA’s) and Qualified Tuition Plans (QTP’s). Coverdell ESA’s were previously known as Education IRA’s.

Line 5:
If worksheet Coverdell ESA”s is added then value comes from worksheet line 5.otherwise the user has to manually enter the amount.

Line 6:
Enter on this line any amount from line 5 that is not subject to additional Tax.
This tax does not apply to distributions that are includible in income if:

  • Due to death or Disability of the Beneficiary.
  • Made on account of a tax-free scholarship, allowance or payment described in section 25A(g)(2);
  • Made because of attendance by the Beneficiary at the US Military academy. This exception applies to the extent that the distribution does not exceed the cost of advance education at the academy.
  • Included in income because you used the qualified education expenses to figure the Hope and Life Time Learning Credit.

PART-III: Additional Tax on Excess Contributions to Traditional IRA’s
Part -3 calculates the tax on excess contributions to Traditional IRA’s. If there was an excess contribution in 2005 but the value of Traditional IRA’s at the end of 2005 was zero, there was no penalty in 2005, and part-3 will not be completed in 2006 unless an excess contribution was made in 2006.

Line 9:
Enter the amount manually from line 16 of your 2005 Form 5329 only if the amount on line 17 of 2005 Form 5329 is more than zero.

Line 10:
Enter on this line the amount of your 2006 contribution if your IRA contributions for 2006 are less than your maximum allowable contribution.
Refer IRS instructions of this form.

Line 11:
Enter on this line any withdrawals from your traditional IRA’s that are included in your income. Do not include any withdrawn contributions reported on line 12.

Line 12:
Enter any excess contributions to your traditional IRA’s for 1976 through 2004 that you had returned to you in 2006 and any 2005 excess contributions that you had returned to you after the due date (including Extensions) of your 2005 income tax return, that are not included on line 9.
For more details refer Form 5329 instructions.

Line 15:

  • The package enters the excess contributions for 2006 from the IRA worksheet.
  • Also refer the instructions for line 10 to figure your contribution limit for Traditional IRA’s.
  • Any amount you contribute for the year in which you reach age 701/2 or a later year is an excess contribution because your contribution limit is zero.
  • DO not include Rollovers in figuring the excess contributions.

Line 17:
Enter the value of your traditional IRA’s at the end of this year on line 17 inner box.
The package calculates 6% of the smaller of line 16 OR the value of your IRA’s on the last day of the year, including the contributions for 2006 made in 2007.

PART-IV: Additional Tax On Excess Contributions to ROTH IRA’s
Part -4 calculates the tax on excess contributions to Roth IRA’s. IF there was a excess contribution in 2005 but the value of the ROTH IRAs at the end of the 2005 was zero, there was no penalty in 2005, and Part-4 will not be completed in 2006 unless an excess contribution was made in 2006.

Line 18:
Enter the amount manually from line 24 of your 2005 Form 5329 only if the amount on line 25 of 2005 Form 5329 is more than zero.

Line 19:
Enter on this line the amount of your 2006 contribution if your IRA contributions for 2006 are less than your maximum allowable contribution.
Refer IRS instructions of this form.

Line 20:
Generally, enter the amount from Form 8606 line 19, plus any Qualified distributions. But if you withdrew the entire balance of all your Roth IRA’s do not enter less than the amount on Form 5329, line 18.

Line 23:

  • The package enters the excess contributions for 2006 from the IRA worksheet.
  • Also refer the instructions of Form 8606 to get any information regarding Withdrawals.
  • Also, if you had reached age of 591/2 at the time of withdrawal, include the earnings as an early distribution on line 1 of Form 5329 for the year in which you report the earnings.
  • DO not include Rollovers in figuring the excess contributions.

Line 25:
Enter the value of your ROTH IRA’s at the end of this year on line 25 inner box.
The package calculates 6% of the smaller of line 24 OR the value of your IRA’s on the last day of the year, including the contributions for 2006 made in 2007.

PART-V: Additional Tax On Excess Contributions to Coverdell ESA’s
Part -5 calculates the tax on excess contributions to Coverdell ESA’s. If there was an excess contribution in 2005but the value of Coverdell ESA’s at the end of 2005 was zero, there was no penalty in 2005, and Part-5 will not be completed in 2006 unless an excess contribution was made in 2006.

Line 26:
Enter the amount manually from line 32 of your 2005 Form 5329 only if the amount on
line 33 of 2005 Form 5329 is more than zero.

Line 27:
Enter on this line the amount of your 2006 contribution if your Coverdell ESA contributions for 2006 are less than your maximum allowable contribution.
Refer IRS instructions of this form.

Line 28:
The Package enters the total distributions from Coverdell ESA’s Worksheet in 2006.
Do not include rollovers or returned excess contributions.

Line 31:

  • The package enters the excess contributions for 2006 from the Coverdell ESA’s worksheet.
  • Also, The maximum contribution may be limited based on the contributor’s modified AGI. For more details refer publication 970.
  • DO not include Rollovers in figuring the excess contributions.

Line 33:
Enter the value of your Coverdell ESA’s at the end of this year on line 33 inner box.
The package calculates 6% of the smaller of line 32 OR the value of your Coverdell ESA’s on the last day of the year, including the contributions for 2006 made in 2007.

PART-VI: Additional Tax On Excess Contributions to Archer MSA’s
Part -6 calculates the tax on excess contributions to Archer MSA’s. If there was an excess contribution in 2005 but the value of the Archer MSA’s at the end of 2005 was zero, there was no penalty in 2005, and Part-6 will not be completed in 2006 unless an excess contribution was made in 2006.

Line 34:
Enter the amount manually from line 40 of your 2005 Form 5329 only if the amount on
line 41 of 2005 Form 5329 is more than zero.

Line 35:
Enter on this line the amount of your 2006 contribution if your Archer MSA contributions for 2006 are less than your maximum allowable contribution.
Refer IRS instructions of this form.

Line 36:
The Package enters the excess distributions from Form 8853 line 10 of 2006.

Line 39:
The package enters the excess contributions for 2006 from Form 8853.
For more details refer instructions of form 8853.

Line 41:
Enter the value of your Archer MSA’s at the end of this year on line 41 inner box.
The package calculates 6% of the smaller of line 40 OR the value of your Archer MSA’s on the last day of the year, including the contributions for 2006 made in 2007.

PART-VII: Additional Tax on Excess Contributions to Health Savings Account (HSA’s)
Part -7 calculates the tax on excess contributions to Health Savings Account (HSA’s). If there was an excess contribution in 2005 but the value of the HSA’s at the end of 2005 was zero, there was no penalty in 2005, and Part-7 will not be completed in 2006 unless an excess contribution was made in 2006.

Line 42:
Enter the amount of excess contributions made to the Health Savings Accounts.

Line 43:
Enter on this line the amount of your 2006 contribution if your HAS contributions for 2006 are less than your maximum allowable contribution.
Refer IRS instructions of this form.

Line 44:
The Package enters the excess distributions from Form 8889 line 14 of 2006.

Line 47:
The package enters the excess contributions for 2006 from  Form 8889 line 11.
For more details refer instructions of form 8853

Line 49:
Enter the value of your HSA’s at the end of this year on line 49 inner box.
The package calculates 6% of the smaller of line 48 OR the value of your HSA’s on the last day of the year, including the contributions for 2006 made in 2007.

PART-VIII: Additional Tax on Excess Accumulation in Qualified Retirement Plans
Part -8 calculates the tax on excess accumulations in Qualified retirement plans, including Traditional IRA’s.

Line 50:

  • Enter the amount of your minimum required distribution from a Qualified Retirement plan.
  • In general, the taxpayer must begin receiving distributions from a traditional IRA by April 1 of the year following the year he or she reached the age 701/2.

  • If the taxpayer is retired, he or she must also begin receiving distributions from a Qualified plan by April 1 of the year following the year he or she reached age 701/2.
  • If the taxpayer is not retired, he or she can delay receiving distributions from a Qualified plan, but not from a traditional IRA, until April 1 of the Year following the year he or she retires.

Line 51:
Enter the amount actually distributed in 2006.
For more information refer IRS instructions.

Line 53:
The package calculates additional Tax at 50% of amount calculated on line 52. This amount is then transferred on Form 1040 Line 60.

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