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Updated April 06, 2024 Reviewed by Reviewed by Ebony HowardEbony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries.
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Part of the Series Federal Tax Forms1099 Forms INT–OID
1099 Forms PATR–SA
Form 5329 is an attachment to the federal income tax return that must be filed by taxpayers who owe a penalty related to their use of a tax-advantaged retirement savings plan such as an IRA or 401(k) or any other tax-advantaged plans such as the Health Savings Account (HSA) and the Coverdell Education Savings Account (ESA).
Common triggers for Form 5329 include taking an early distribution to a qualified retirement account or making excess contributions to it.
Form 5329 must accompany the taxpayer's annual tax return.
You must complete and submit Form 5329 to the IRS with your tax return if you:
Generally, you have to be at least age 59½ to withdraw money from a retirement account unless you are eligible for an exemption. Money withdrawn earlier is subject to a 10% penalty plus any income tax owed on the amount.
There also are maximum contribution limits, adjusted annually, to these accounts. Anything over that is an "excess contribution."
The table below denotes the annual maximums per account.
You can download all pages of Form 5329 from the IRS website.
An early withdrawal is one made before the account holder reaches age 59½ unless the taxpayer qualifies for one of the exceptions to the rule.
The IRS imposes a 10% penalty for an early withdrawal unless the money is withdrawn for certain purposes. That's on top of any income taxes owed on the money withdrawn.
There are a number of these exceptions and the list changes from time to time. Current exceptions are made for educational expenses, a first-time home purchase, medical expenses, and more.
As of the 2023 tax year, the age at which a retirement account holder must begin making annual withdrawals is 73. The age for RMDs was 72 from 2020 through 2022. Before 2020, it was 70½.
The amount you must withdraw is based on the amount of money in the account and your life expectancy. The tax return instructions include a table to help you calculate the amount.
You are generally responsible for paying the penalty on IRAs, including those for excess contributions. In some cases, your IRA custodian or plan trustee is now allowed to pay the penalty on your behalf as long as there are enough funds in the account.
When submitting a distribution request, you should elect to have amounts withheld only for federal and state tax, if applicable.
Penalties must be paid directly to the IRS, and are usually recorded on your tax return.
The IRS offers a number of long-term savings plans that help taxpayers save for retirement, for a child's college education, or for miscellaneous healthcare costs.
But every one of those accounts comes with rules that ensure they are used correctly and that the IRS gets the money it's due sooner or later.
Form 529 is primarily used to report instances of uses of one of these accounts that might not meet the rules.
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Description Part of the Series Federal Tax Forms1099 Forms INT–OID
1099 Forms PATR–SA
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An after-tax contribution is a deposit into a retirement account of money that has been taxed in the year in which it was paid into the account.
The life expectancy method calculates IRA payments by dividing the balance of a retirement account by the policyholder’s anticipated length of life.
The thrift savings plan (TSP) is a retirement investment program open only to federal employees and members of the uniformed services.
The CSRS provided the retirement, disability, and survivor benefits for most U.S. civilian service employees working for the federal government.
Rule 72(t), issued by the Internal Revenue Service (IRS), allows for penalty-free withdrawals from an IRA account and other certain tax-advantaged accounts.
A 457 plan is a tax-advantaged retirement savings account available to many employees of governments and nonprofit organizations.
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