Information for retirees affected by an improper distribution code on their 2017 1099R tax form.
As of December 2017, Connecticut automated its retiree payroll and tax form administration that serves more than 60,000 state and municipal retirees. The Comptroller's office initiated its own internal audit and legal review to identify any improper coding that may have resulted from this transition process.
Our internal review identified an improper distribution code that affects approximately 318 retirees (retirees who were given a distribution code 1 when they must be coded 2). The internal review also identified approximately 2,556 retirees who were correctly coded 1 but who (based on their age) must complete a Form 5329 when they submit their 2017 tax forms in order to avoid a potential 10% early distribution tax.
New correctly coded 1099-R tax forms will be immediately mailed to the 318 retirees affected by an incorrect distribution code.
Notifications will also be immediately sent to the 2,556 retirees who were correctly coded, but who must submit a Form 5329 with their taxes.
The form can also be found at www.irs.gov (search for Form 5329). The specific qualifying exceptions can be found on page 4 of the 5329 instructions.
Retirees affected can file Form 5329 with their 2017 Form 1040 or Form 1040NR by the due date, including extensions of their Form 1040 or Form 1040NR. Those who do not have to file a 2017 income tax return, can complete and file Form 5329 by itself at the time and place required to file 1040 or Form 1040NR. For those who file Form 5329 by itself, it cannot be filed electronically. Include your address on page 1 of the form and signature and date on page 2 of the form. Additional instructions can be found under 'When and Where to File' on page 1 of the instructions.
Please see the images below for examples of a completed Form 5329 and where the distribution code 1 is located on your 1099R form.
The Office of the State Comptroller do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before taking any action.