Joey B Posted February 11, 2008 Report Share Posted February 11, 2008 My client has a distribution from a Qualified pension plan of $21,000 which was used as a down payment on his very first home. Since this came from a Qualified plan, can up to $10,000 be subtracted from the distribution and balance charged 10% tax? This is not an IRA, where I believe there is this allowance but does it also include 'qualified plans'? The tax programs are allowing the deduction. Thanks for thoughts Joey B Quote Link to comment Share on other sites More sharing options...
bay Posted February 11, 2008 Report Share Posted February 11, 2008 My client has a distribution from a Qualified pension plan of $21,000 which was used as a down payment on his very first home. Since this came from a Qualified plan, can up to $10,000 be subtracted from the distribution and balance charged 10% tax? This is not an IRA, where I believe there is this allowance but does it also include 'qualified plans'? The tax programs are allowing the deduction. Thanks for thoughts Joey B I would suggest looking at code section 72 to strart with. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 11, 2008 Report Share Posted February 11, 2008 If there is a change to the law, please let me know, because I have a client in the same mess. Took the distribution from the 401K. 10% penalty applies. Please correct me if I am wrong because I still have the return at my desk waiting for other final items from the client. How is "the tax programs are allowing the deduction"? Are you entering a code in the penalty worksheet for IRA withdrawal for first time homebuyer? Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
jainen Posted February 11, 2008 Report Share Posted February 11, 2008 >>How is "the tax programs are allowing the deduction"?<< I tried it in Lacerte, and erased the penalty slick as can be! Just goes to show we can't let our machines take over the world because they don't think things through right. It's up to us, not some nice guy in Caribou, to do a quality job. Or, as we used to say in the good olde days of DOS, garbage in, garbage out. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted February 13, 2008 Report Share Posted February 13, 2008 Nope, 401(k) does not qualify for first time homebuyers exemption, only IRAs. I just tried it on ATX. sure does let it go through, without even an error message. I wonder if TurboTax will let you do it? Somehow I don't think it will... Quote Link to comment Share on other sites More sharing options...
Cathy Posted February 13, 2008 Report Share Posted February 13, 2008 Just tried the program also. The only way for ATX to eliminate the 10% penalty in this case would be for the preparer to INCORRECTLY enter the code "9" on form 5329...which as others have noted will not apply in this case as the distribution is NOT from an IRA. Bummer......but that's why we all have returns to prepare. Quote Link to comment Share on other sites More sharing options...
Joey B Posted February 13, 2008 Author Report Share Posted February 13, 2008 Nope, 401(k) does not qualify for first time homebuyers exemption, only IRAs. I just tried it on ATX. sure does let it go through, without even an error message. I wonder if TurboTax will let you do it? Somehow I don't think it will... I had a friend try it on the 'pro series' program and it did allow the deduction! I am glad we need to think once in a while Joe B Quote Link to comment Share on other sites More sharing options...
lbbwest Posted February 13, 2008 Report Share Posted February 13, 2008 >>How is "the tax programs are allowing the deduction"?<< I tried it in Lacerte, and erased the penalty slick as can be! Just goes to show we can't let our machines take over the world because they don't think things through right. It's up to us, not some nice guy in Caribou, to do a quality job. Or, as we used to say in the good olde days of DOS, garbage in, garbage out. I don't know what you are talking about jainen, when the program doesn't want to do what I think it should do to erase penalties, lower taxes, or increase credits; I just post on this board, find somebody to agree with me, and overwrite the entry. It works really well. lbb Quote Link to comment Share on other sites More sharing options...
jainen Posted February 13, 2008 Report Share Posted February 13, 2008 >>I just post on this board, find somebody to agree with me, and overwrite the entry. It works really well.<< Sure. I can see how that would work for you. My problem is that I can almost never find anyone to agree with me! Quote Link to comment Share on other sites More sharing options...
lbbwest Posted February 13, 2008 Report Share Posted February 13, 2008 "Sure. I can see how that would work for you. My problem is that I can almost never find anyone to agree with me!" It's truly the unfairness of life; in addition to good looks, an acerbic sense of humor, and vast intelligence, some are graced with charm. PS Agreement happens ONLY when the subject is elimination of penalty, reduction of tax, or increase in credits. lbb Quote Link to comment Share on other sites More sharing options...
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