IRS Form 5329 – IRS Forms, Instructions, Pubs 2026

IRS Form 5329 – IRS Forms, Instructions, Pubs 2026 – In the world of retirement savings and tax-advantaged accounts, staying compliant with IRS rules is crucial to avoid unexpected penalties. IRS Form 5329, titled “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts,” plays a key role in reporting these penalties. Whether you’re dealing with early withdrawals from an IRA, excess contributions to an HSA, or missed required minimum distributions (RMDs), this form helps calculate and report the extra taxes owed. This article breaks down everything you need to know about Form 5329 for tax year 2025, including when to file, how to complete it, and ways to potentially avoid or waive penalties.

What Is IRS Form 5329 and What Does It Cover?

Form 5329 is an IRS tax form used to report and calculate additional taxes on various tax-favored accounts when certain rules are violated. These accounts include individual retirement accounts (IRAs), 401(k)s, 403(b)s, health savings accounts (HSAs), Coverdell education savings accounts (ESAs), qualified tuition programs (QTPs like 529 plans), Archer medical savings accounts (MSAs), Achieving a Better Life Experience (ABLE) accounts, and modified endowment contracts.

The form addresses several types of penalties:

  • 10% tax on early distributions: Applied to withdrawals from qualified retirement plans or IRAs before age 59½.
  • 6% tax on excess contributions: For overcontributing to IRAs, Roth IRAs, ESAs, MSAs, HSAs, or ABLE accounts beyond allowable limits.
  • 10% or 25% tax on excess accumulations: For failing to take required minimum distributions (RMDs) from retirement plans.
  • Additional taxes on distributions from education or ABLE accounts that aren’t used for qualified expenses.

For 2025, key limits include $7,000 for traditional or Roth IRA contributions ($8,000 if age 50 or older), $2,000 for Coverdell ESAs, and $19,000 plus employer contributions for ABLE accounts. Exceeding these can trigger the 6% penalty, calculated on the excess amount or the account’s value at year-end, whichever is smaller.

Who Needs to File Form 5329?

Not everyone with a retirement or tax-favored account needs to file Form 5329—only those who incur specific penalties or qualify for exceptions. You must file if:

  • You took an early distribution from a qualified plan or IRA and owe the 10% additional tax (unless it’s already reported on your Form 1099-R).
  • You received taxable distributions from ESAs, QTPs, or ABLE accounts.
  • You made excess contributions to IRAs, Roth IRAs, ESAs, MSAs, HSAs, or ABLE accounts, or had excess from prior years.
  • You didn’t take your full RMD from a qualified retirement plan.
  • You’re reporting an exception to the early distribution tax, even if no tax is due (e.g., for medical expenses or first-time home purchases).

Estates and trusts may also need to file with Form 1041. If you don’t owe income tax, file Form 5329 separately by the due date of Form 1040 (typically April 15, 2026, for tax year 2025, with extensions available).

Step-by-Step Guide: How to Fill Out Form 5329

Form 5329 has nine parts, but you’ll only complete the relevant ones. Attach it to your Form 1040, 1040-SR, 1040-NR, or 1041. Here’s an overview:

Part I: Additional Tax on Early Distributions

  • Line 1: Enter early distributions included in your income (from Form 1099-R or Form 8606 for Roth IRAs).
  • Line 2: Subtract distributions that qualify for exceptions (use codes like 05 for disability or 12 for higher education expenses).
  • Line 3: Amount subject to tax.
  • Line 4: 10% tax (or 25% for certain SIMPLE IRA distributions within two years of participation). Report on Schedule 2, line 8.

Part II: Additional Tax on Distributions From Education and ABLE Accounts

  • Line 5: Taxable distributions from ESAs, QTPs, or ABLE accounts.
  • Line 6: Exceptions (e.g., due to death or disability).
  • Line 7: Amount subject to 10% tax.
  • Line 8: Tax amount.

Parts III–VIII: Additional Taxes on Excess Contributions

These parts follow a similar structure for different accounts:

  • Start with prior-year excess (if any).
  • Add 2025 excess contributions.
  • Subtract withdrawals or applied amounts.
  • Calculate 6% tax on the excess or year-end value (whichever is smaller).

For example, in Part III for traditional IRAs, the limit is based on your compensation, up to $7,000/$8,000.

Part IX: Additional Tax on Excess Accumulations

  • Line 52: Required minimum distribution amount.
  • Line 53: Actual distributions taken.
  • Line 54: Shortfall subject to 25% tax (reduced to 10% if corrected timely).

Sign and date the form, and pay any tax due via IRS.gov/Payments.

Common Exceptions and How to Avoid Penalties?

Many penalties can be avoided or waived:

  • Early distribution exceptions: Include distributions after age 55 and job separation, for medical expenses exceeding 7.5% of AGI, first-time homebuyers (up to $10,000 lifetime), qualified birth or adoption (up to $5,000), or disaster recovery. Enter the appropriate exception code on line 2 of Part I.
  • Waivers for RMDs: If you missed an RMD due to reasonable cause, enter “RC” on line 54 and attach a statement explaining the error and steps to remedy it. The tax drops to 10% if corrected within a two-year window.
  • Correcting excess contributions: Withdraw the excess (plus earnings) by your tax return due date to avoid the 6% tax. Earnings may be subject to the 10% early distribution tax but qualify for exception code 21.

Rollovers within 60 days are generally tax-free and not subject to early distribution taxes. The IRS may waive the 60-day rule for hardships via self-certification.

Recent Updates for Tax Year 2025

For 2025, RMDs start at age 73, and contribution limits remain steady (e.g., IRA limits unchanged from 2024). Qualified disaster distributions post-2021 are exempt from the 10% tax. Always check IRS.gov for post-publication changes, as legislation like the SECURE Act continues to influence rules.

Tips for Filing Form 5329 and Avoiding Common Mistakes

  • Double-check limits: Use IRS worksheets to calculate allowable contributions based on your AGI and filing status.
  • Track distributions: Review Form 1099-R carefully to ensure exceptions are applied correctly.
  • File on time: Attach to your main return or file separately if no return is due.
  • Seek professional help: If you’re unsure, consult a tax advisor, especially for complex situations like Roth conversions or ABLE accounts.
  • Amend if needed: If you discover an error after filing, use Form 1040-X and refile Form 5329.

By understanding Form 5329, you can better manage your retirement and savings accounts, minimizing penalties and maximizing tax benefits. For the official form and instructions, visit IRS.gov. Remember, this information is for educational purposes—consult the IRS or a tax professional for personalized advice.