User's Manual - Drake Software

Penalties
Drake Software User’s Manual
Adjustments to SEP, SIMPLE, and Qualified Plans
Penalties
Early Withdrawal Penalty
IRA Withdrawal Penalty
Screen code: 5329
Self-employed health insurance deduction information entered on the SEHI or SEP
screen will be adjusted by any entries made in the SEP and/or SIMPLE and
KEOGH contribution fields on screen 4.
This section of the manual covers penalties on withdrawals. Penalties on estimated
taxes are covered in “Estimated Tax Penalty” on page 154.
If the taxpayer is subject to the penalty for early withdrawal of savings, enter the penalty
amount on screen 4. Do not duplicate entries in this field on the INT screen; the
1099-INT form asks for the interest or principal that was forfeited due to early withdrawal,
while screen 4 asks for the actual amount of the penalty.
Use the 5329 screen to calculate what penalties apply regarding IRA withdrawals.
NOTE
Exception numbers 01 and 06 (Part I, line 2) apply only to distributions
from qualified employee plans—not to those from IRAs, annuities, or
modified endowment contracts.
Alimony Paid
IRA Adjustments
See also “IRA Penalty Computations” on page 120.
Enter details about alimony paid in the Alimony fields on screen 4.
To enter IRA adjustments, see “Retirement Income” on page 118.
Student Loan Interest Deduction
Education Expenses
Screen codes:
8917, 8863
Enter student loan interest deduction amounts (Form 1098-E, Student Loan Interest
Statement) into the Student loan interest deduction field on screen 4.
Entry fields for Forms 8863 (Education Credits) and 8917 (Tuition and Fees Deduction)
are located on the same screen. The 8863/8917 screen should be used to enter
information about the student and the educational institution the student attended.
In the past, screen 8863 was used if the taxpayer or spouse was a student; if a dependent
was a student, the education expenses were entered on the Dependents screen
138 Tax Year 2012