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457 Distribution

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Hi

For filling in the tax form 1040. Is a 457 deferred compensation plan distribution:

1 An IRA (lines 15a/b) or

2 A pensions/annuities (line 16a/b)

 

very confused, i think it is a pension/annuity??, but keep seeing several references to treat it as a qualified retiremant plan and ira??. my 1099-r doesn't say which it is just generlizes that a 1099-r is used for all of them, ira's, pensions, etc etc

 

do i have to file a 5329 early distrubution tax form. I was 32 when i cashed in my 457 (left job). i did not roll it over. i did have code 2 in box 7 on my 1099-R. (worked for public works (government))

Form 5329 instructions do not say code 7 is an excemption to tax, but pub 575 page 30 does say it is. so file or not 5329??

 

Thanks Andy

 

 

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Andy,

 

I'm not a tax guy, but I'm fairly sure it is reported on 16a/b, not 15a/b. You said that code 2 is already on the 1099-R, so that already indicates that the distribution is exempt from the 10% excise tax, so I don't think you have to file a form 5329.

 

However, if you feel safer by adding the 5329 anyway, then, look at the middle column on page 2 of the 5329 instructions, last bullet point before line 1 instructions.

 

http://www.irs.gov/pub/irs-pdf/i5329.pdf

 

Then see code 12 on page 3 and the second bullet point under the explanation for "other".

 

Let me know it that helps.

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Thanks

Yea reading again and again, all depends how you translate it (hate taxes and tax laws) Thou Pub 575 does say:

 

"Exceptions to tax. Certain early distributions are ex-cepted

from the early distribution tax. If the payer knows

that an exception applies to your early distribution, distribu-

tion code “2,” “3,” or “4” should be shown in box 7 of your

Form 1099-R and you do not have to report the distribution

on Form 5329. If an exception applies but distribution code

“1” (early distribution, no known exception) is shown in box

7, you must file Form 5329. Enter the taxable amount of the

distribution shown in box 2a of your Form 1099-R on line 1

of Form 5329. On line 2, enter the amount that can be

excluded and the exception number shown in the Form

5329 instructions."

 

which conflicts with form 5329 "who has to file section??"

hey i have code 2, so no file "final answer" lol (

"do not have to report on form..." means no file form- ??, if u don't have other early penalities right?

 

my next problem is state taxes,

i live in MD (always)

the job location was in DE (last worked there 2 yrs so no direct income from DE?)

the 457 company paying the 1099-r is from DC (cry, cry) .

DE usally wants the taxes, if the employer is based there and then u need to get a state credit. I think. not sure.

the 457 company did use a state/payers no. of MD#####, so i think it is only subject to md taxes (cry, cry)

hopefully i would hate to file MD,DE,DC over a $40 (big retirement) or screw up the forms.

 

Thanks

 

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You do not have to file the 5329 unless there is some additional information about your 457(b) account that you have not disclosed, such as a previous rollover into that account from a non-457(b) plan.

 

State and local taxes?

 

I don't know the answer for certain, but here's my guess (which could be wrong): The state taxes only apply to the state that you are a resident in at the time the distribution is made. It's not the same as W-2 payroll, where the location of your employer matters, it's pension income.

 

If I recall, New York (or some other state) had tried to keep taxing the pensions of residents (now former residents) after they retired and moved to some place like Florida. I think (but I could be wrong) that some kind of Federal action occurred that made that problem go away.

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Thanks John

I think you are correct (hope) Depends on residing state. just needed a second option, to boost the the tax worries. Thanks

 

Keep up the good work

 

Andy

 

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