My wife cashed in a traditional IRA and Roth IRA in October 2008 (We are both under 55). She is disabled and has been receiving social security disabliity since August 2008. Her IRA distribution was $800 on the 1099R (she actually received $790 with $10 fee charged by the IRA adminstrator), and her Roth IRA distribution was $850 (she converted an IRA to Roth in 1999 with $650 conversion amount). However, she neglected to tell her IRA adminitrator that she was disabled, so the traditional IRA 1099R shows code 1 (early distribtion with no exception), and the Roth IRA 1099R shows code J (early distribiton with no exception). I read pub 590 and the form instructions. As far as I can tell, if we treat these early distribution with no exception, we'll need to file both form 5329 and
8606. Here is what I figuredForm 8606 - to report early Roth IRA distribtion: line 19 - $850 distribtion line 22 - $150 contribution in 2000 and 2001 line 34 - $650 conversion basis from traiditonal IRA to Roth IRA in
1999 line 25c - $50 taxable amount to include in form 5329 (for 10% penalty) and form 1040 15b (for income)Form 5329 - to report early IRA and Roth IRA distribution penalty line 1 - $850 - $800 from traditional IRA and $50 from Roth IRA (line
25c form 8606) line 2 - $0 - since the traditional IRA 1000R shows code 1 and Roth 1099R shows code J line 3 - $850 net amount line 4 - $85 - 10% penalty to include on form 1040 line 59 end of form 5329 inputSo, on form 1040, line 15a would show $1,650 (800 IRA, 850 Roth), line
15b would show $850 (same as $ on form 5329 line 3, $800 for IRA, $50 for Roth) and line 59 would show $85 (10% of the $850 on form 5329 line 3).Are my calculations correct?
Another question is, can we claim disablility even though the 1099Rs show code 1 and code J? On form 5329 line 2, it says to put on exception code. If I put in code 3 for traditioanl IRA disability (my wife is receiving social security disability, so I assume that she is qualified as permanently disabled). If I do that, what amount should I put on form 5329 line 2 - Is it $800 for IRA and $50 for Roth = $850 (so the penalty is 0), or is it just the traditional IRA distribution of $800 (so the only penalty is 10% of the $50 earnings from Roth $5)?
Also, I assume that regardless of disability, both IRA distribution of $800 and Roth IRA earnings of $50 are still taxable, so the 1040 line
15b is still $850?Thank you for your help in advance.