IRS Form 5329 – Retirement Account Taxes

Form 5329 reports additional taxes connected with retirement plans, individual retirement arrangements, Coverdell education savings accounts, Archer medical savings accounts, health savings accounts, and ABLE accounts. It is not limited to penalties on early IRA withdrawals. Its nine parts cover distinct events, and a taxpayer completes only the parts that apply.

The final 2025 form is current. A taxpayer may need it even when a payer issued Form 1099-R, because the payer may not know whether an exception applies, whether the taxpayer has basis, or whether accounts held elsewhere create an excess. Form 5329 can also be filed by itself when no income tax return is otherwise required, although a stand-alone form cannot be electronically filed under the current instructions.

Part I tests the tax on early distributions

Taxable distributions from qualified retirement plans and IRAs before age 59½ are generally subject to a 10% additional tax unless an exception applies. Certain early distributions from a SIMPLE IRA during the two-year participation period can face a 25% rate. The taxable amount, not necessarily the gross distribution, is the starting point. Basis computed on Form 8606 can therefore change the Part I amount.

Exceptions are specific to the type of plan. Disability, death, substantially equal periodic payments, certain medical expenses, qualified birth or adoption distributions, terminal illness, domestic abuse, disaster relief, and other statutory events may qualify. An exception available for an IRA is not automatically available for an employer plan, and vice versa. Enter the numeric exception code required by the 2025 instructions and retain proof of the facts and amount.

If box 7 of Form 1099-R has the correct exception code and the full distribution is exempt, Form 5329 may not be required solely for that distribution. If the payer used code 1 but the taxpayer qualifies for an exception, the taxpayer generally uses Form 5329 to assert it. Multiple exception types may require the combined code specified by the instructions.

Parts II through VI address contribution limits

Part II handles certain distributions from qualified education programs and Coverdell accounts, while Part III covers excess contributions to traditional IRAs. Parts IV and V cover excess contributions to Roth IRAs and Coverdell ESAs; Part VI covers Archer MSAs. A 6% excise tax commonly applies to an excess that remains in the account at year-end, subject to the balance and deduction limits in the relevant part.

An excess contribution is not corrected merely by promising to contribute less next year. Correction may require a timely distribution of the excess plus allocable earnings, a recharacterization when permitted, or carrying the excess forward and absorbing it under a later limit. Earnings withdrawn with a timely correction may be taxable under the rules for the contribution year. The custodian’s coding should be reconciled with the taxpayer’s election and filing deadline.

Traditional IRA excess calculations can interact with a deduction claimed on Schedule 1, and Roth IRA eligibility depends on modified adjusted gross income. Married filing status, age, compensation, and employer-plan participation affect the underlying contribution rules. Keep a year-by-year contribution ledger rather than relying solely on the current custodian statement.

Parts VII and VIII cover HSA and ABLE excesses

Part VII determines the additional tax on excess HSA contributions. The annual limit depends on coverage, age, eligibility months, employer contributions, and special rules such as the last-month rule. Employer and payroll contributions count toward the limit even though they do not appear as a personal deduction. The contribution computation on Form 8889 should agree with the excess tested on Form 5329.

Part VIII applies to excess contributions to an ABLE account. Contributions from all sources must be coordinated with the annual limit and any additional amount allowed for an employed designated beneficiary. A corrective distribution must satisfy the timing and earnings rules. Account statements and Forms 5498-QA should be reconciled to the amount actually deposited for the year.

Part IX measures required minimum distribution failures

A taxpayer who fails to take the full required minimum distribution may owe an excise tax on the shortfall. Under current law, the rate is generally 25%, reduced to 10% when the shortfall is corrected within the correction window and the other requirements are met. The beginning date, life-expectancy factor, account balance, beneficiary status, and plan type all affect the required amount.

Owners generally aggregate RMDs from traditional IRAs under the applicable rules but cannot freely combine every employer plan. Inherited accounts follow beneficiary rules that can include annual distributions, a ten-year deadline, or both depending on the decedent, beneficiary, and year of death. Roth IRA owners have different lifetime treatment, while designated Roth employer accounts changed under recent law. Calculate the requirement account by account before applying any permitted aggregation.

The IRS may waive the Part IX tax when the shortfall was due to reasonable error and reasonable steps are being taken to remedy it. A taxpayer requesting a waiver completes the part as directed, writes the required notation, attaches an explanation, and pays the tax only if the IRS later assesses it. The explanation should state the cause, discovery date, corrective distribution, and controls adopted to prevent recurrence.

Filing Form 5329 separately or with a return

When an income tax return is filed, attach Form 5329 to Form 1040, 1040-SR, 1040-NR, or the applicable estate or trust return. Each spouse generally files a separate Form 5329 because the taxes belong to the individual account owner. Transfer the total additional taxes to Schedule 2 as directed by the annual return instructions.

If no return is required, complete the identifying information, sign Form 5329, and mail it to the address in the instructions. A taxpayer correcting a prior year should use that year’s form and generally file it with an amended return when an original return was filed. Do not use the 2025 form to report a 2024 excess or RMD solely because the correction occurred in 2025.

Use account histories, not isolated tax slips

• Collect every Form 1099-R, 1099-Q, 5498, 5498-SA, and 5498-QA relevant to the year.
• Confirm contribution dates, designated years, rollovers, recharacterizations, corrective distributions, and allocable earnings.
• Retain medical, disability, disaster, birth, adoption, or other evidence for an early-distribution exception.
• Recompute required minimum distributions from the proper prior-year values and beneficiary category.
• Carry unresolved excesses and prior-year corrections forward on a permanent schedule.

Form 5329 is often where a mismatch becomes visible. Compare custodian reporting with the taxpayer’s own chronology before accepting a code or balance. Early correction can reduce an excise tax, but only if the distribution, filing, and documentation satisfy the particular rule involved.

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