IRS Instruction 5329 – IRS Forms, Instructions, Pubs 2026 – In the complex world of retirement savings and tax-advantaged accounts, IRS Form 5329 plays a crucial role for taxpayers who may owe additional taxes on early distributions, excess contributions, or minimum distribution shortfalls. Whether you’re dealing with IRAs, 401(k)s, HSAs, or education savings accounts, understanding the instructions for Form 5329 can help you avoid penalties and ensure compliance. This SEO-optimized guide breaks down the key details for tax year 2025, drawing from official IRS resources to provide accurate, up-to-date information.
What Is IRS Form 5329 and Its Purpose?
IRS Form 5329, titled “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts,” is used to calculate and report extra taxes on various tax-favored accounts. The form covers penalties for early withdrawals, overcontributions, and failures to take required minimum distributions (RMDs). Specifically, it addresses:
- 10% additional tax on early distributions from qualified retirement plans like IRAs (with a potential 25% rate for SIMPLE IRAs in certain cases).
- 6% excise tax on excess contributions to IRAs, Roth IRAs, Coverdell ESAs, Archer MSAs, HSAs, or ABLE accounts.
- 25% (or reduced 10%) tax on excess accumulations when RMDs are not taken.
This form ensures taxpayers pay penalties for non-qualified uses of these accounts, promoting their intended purpose for retirement, education, or health savings.
Who Must File Form 5329?
Not everyone with a retirement or tax-favored account needs to file Form 5329—it’s required only in specific scenarios. You must file if:
- You took an early distribution from a qualified plan (before age 59½) and owe the 10% tax, unless it’s already reported correctly on your Form 1040 via Forms 1099-R.
- You received distributions from Roth IRAs that include recapture amounts or qualified first-time homebuyer funds subject to tax.
- You have excess contributions to IRAs, Roth IRAs, Coverdell ESAs, Archer MSAs, HSAs, or ABLE accounts.
- You failed to take RMDs from qualified plans or IRAs.
- You received taxable distributions from Coverdell ESAs, qualified tuition programs (QTPs), or ABLE accounts.
For joint filers, each spouse files a separate Form 5329 if applicable, but combines the taxes on Schedule 2 of Form 1040. If you’re claiming an exception to the early distribution tax, filing this form is how you report it—even if no tax is due.
When and How to File Form 5329?
File Form 5329 with your Form 1040, 1040-SR, 1040-NR, or 1041 by the tax return due date, including extensions. If you don’t need to file an income tax return but owe taxes from Form 5329, file it standalone by mail (not electronically) to the IRS address for your location. Include your full address on page 1 and sign/date on page 3.
For payments, use IRS.gov/Payments for options like direct pay or credit card. Amended returns? Use the “Amended Return” box on Form 5329 for 2025 changes, or file with Form 1040-X for broader amendments.
Key definitions to know:
- Qualified retirement plan: Includes 401(k)s, 403(b)s, pensions, and IRAs (but not modified endowment contracts).
- Early distribution: Any withdrawal before age 59½.
- Rollover: Tax-free transfers within 60 days; extensions available for disasters or other qualifying reasons.
Step-by-Step Instructions for Completing Form 5329
Form 5329 has nine parts, but you only complete the sections that apply to you. Here’s a breakdown:
Part I: Additional Tax on Early Distributions
This covers the 10% penalty on early withdrawals from IRAs, qualified plans, or modified endowment contracts.
- Line 1: Enter includible early distributions (from Forms 1099-R, 8606, etc.).
- Line 2: Subtract exceptions (see below for codes).
- Line 3: Multiply the result by 10%.
- Line 4: Apply 25% if from a SIMPLE IRA within two years of participation.
Qualified disaster recovery distributions (post-Jan. 26, 2021 disasters) are exempt.
Part II: Additional Tax on Certain Distributions From Education and ABLE Accounts
Report 10% tax on non-qualified distributions from Coverdell ESAs, QTPs, or ABLE accounts.
- Line 5: Enter distributions.
- Line 6: Subtract exceptions (e.g., for death, disability, scholarships).
- Line 8: 10% of the remainder.
Part III: Additional Tax on Excess Contributions to Traditional IRAs
6% tax on overcontributions.
- 2025 limits: $7,000 ($8,000 if age 50+).
- Carry over prior excesses, subtract withdrawals, and calculate 6% on the balance.
- Avoid tax by withdrawing excess by your return due date (plus extensions).
Similar logic applies to Parts IV–VIII for Roth IRAs (AGI-phaseout limits), Coverdell ESAs ($2,000 limit), Archer MSAs, HSAs, and ABLE accounts ($19,000 + earned income).
Part IX: Additional Tax on Excess Accumulation in Qualified Retirement Plans
This is the 25% (or 10% if corrected timely) penalty for missing RMDs.
- RMDs start at age 73 for IRAs and plans.
- Calculate shortfall and apply the tax; request waivers for reasonable cause.
Exceptions to the Additional Taxes on Form 5329
Many exceptions can reduce or eliminate penalties. For early distributions (Part I), use codes like:
- 01: Separation from service after age 55 (or 50 for public safety).
- 03: Total and permanent disability.
- 05: Medical expenses exceeding 7.5% of AGI.
- 08: Higher education expenses.
- 09: First-time home purchase (up to $10,000).
- 19: Qualified birth or adoption (up to $5,000).
- 20: Terminal illness.
- 22: Domestic abuse victim distributions.
- 23: Emergency personal expenses.
Use code 99 for multiple exceptions. Other parts have specific exclusions, like scholarships for education accounts.
Common Mistakes When Filing Form 5329 and How to Avoid Them
Taxpayers often overlook exceptions, miscalculate excesses, or forget to file standalone if no return is due. To avoid issues:
- Gather all Forms 1099-R, 8606, 8889, etc., before starting.
- Double-check contribution limits and RMD calculations using IRS Publications 590-A/B for IRAs or 560 for plans.
- If claiming a waiver, attach a detailed explanation.
- File amended returns if you withdraw excesses after the original due date.
Frequently Asked Questions About IRS Form 5329
1. What if I miss the RMD deadline?
You may qualify for a reduced 10% penalty if corrected within two years, or a full waiver for reasonable cause.
2. Can I avoid the 10% early withdrawal penalty?
Yes, through exceptions like medical expenses, home buying, or rollovers. Qualified disaster distributions are also exempt.
3. What’s new for 2025 Form 5329?
Updates include clarified exceptions for annuities, terminal illness, domestic abuse, and emergencies per IRS Notices 2024-02 and 2024-55. Contribution limits remain $7,000/$8,000 for IRAs.
4. Do Roth IRAs have RMDs?
No lifetime RMDs for Roth IRAs, but inherited ones may require them.
Final Thoughts on Navigating Form 5329
Mastering IRS Form 5329 instructions can save you from unnecessary penalties on your retirement and savings accounts. Always consult official IRS resources or a tax professional for personalized advice, especially with recent updates for 2025. By staying informed, you can make the most of your tax-favored accounts while minimizing tax liabilities. For the full PDF, download from the IRS website.