1099R with S code

[thomtax]

Client, age 24, left a job and company cashed out Simple IRA for 494.37. The code in box 7 is S

According to instructions on back of 1099 "S - Early distribution from a Simple IRA in first 2 years, no known exception (under age 59 1/2). May be subject to an additional 25% tax."

My software, Drake, usually automatically carries the IRA penalties to the 1040, but in this case is not. Are my sleepy eyes missing some obvious point in this situation?

LT

[Koss]

Simple IRA

You probably have to complete Form 5329.

Form 5329 is not required for most cases involving Distribution Code 1.

But I think Code S requires the use of Form 5329, even when the taxpayer does not qualify for any of the exceptions to the penalty.

I've never used Drake. But I'll bet you have to go into the Form 5329 screen, and answer a question or two.

BMK

[Jesse]

I have proseries and the code S automatically brings it to Form 5329, as Burton pointed out, where the penalty is assessed.

[thomtax]

Thanks I had begun to suspect that, but was not sure.

LT

[Snaggletooth]

What on earth

...could give rise to a 25% penalty?? 10% is bad enough.

[Koss]

Oxymoron

A SIMPLE IRA is anything but simple.

BMK

[ChEAr$]

25%

Just day before yesterday I had this case.

Snaggletooth, if a Simple IRS is drawn (before 59 1/2 of course) during first two years of inception, there is indeed a 25% penalty .

My software, Taxwise, may have taken it to 5329, I didn't notice, but the form wasn't with
the return filed; it went directly onto page 2 of 1040, just like the regular 10% penalty.