How to File IRS Form 5329: Reporting Additional Taxes on Retirement Accounts
Part I, Early Distributions (10% Additional Tax), Part VIII, RMD Failures (25% Excise Tax), and Part III, Excess
Nobody sets out to file this. It is the form for retirement and savings situations that have already gone wrong: money taken out early, more paid in than the rules allow, or a required withdrawal missed.
Several of the reliefs available depend on the position being corrected promptly once it is noticed, which makes discovering a problem and acting on it the same task rather than two.
This covers the situations that bring you here, the exceptions worth knowing about, how each part of the form is used, and what evidence supports a claim that an exception applies.
IRS Form 5329 is filed when a taxpayer owes additional taxes related to retirement accounts or other tax-favored accounts. This includes the 10% early distribution penalty, the 6% excess contribution excise tax, and the 25% penalty for failing to take a required minimum distribution (RMD). The form is attached to Form 1040 (or filed separately if the main return is not required).
Part I, Early Distributions (10% Additional Tax)
If you withdrew money from a traditional IRA, 401(k), or similar retirement plan before age 59 1/2, the distribution is generally subject to ordinary income tax plus a 10% additional tax. The 10% is calculated on the taxable portion of the distribution.
Exceptions to the 10% Penalty (Code Numbers)
| Exception | Code (Enter on Form 5329 Line 2) |
|---|---|
| Death of the account owner | 01 |
| Total and permanent disability | 03 |
| Substantially equal periodic payments (SEPP / 72(t)) | 02 |
| Unreimbursed medical expenses exceeding 7.5% of AGI | 05 |
| Health insurance premiums while unemployed | 06 |
| Qualified higher education expenses | 08 |
| First home purchase (lifetime limit $10,000) | 09 |
| IRS levy on the plan | 10 |
| Qualified reservist distributions | 12 |
| Qualified disaster distributions | 11 |
| Birth or adoption (up to $5,000) | 14 |
| Terminally ill individual | 15 |
| Domestic abuse victim (up to $10,000) | 16 |
| Emergency personal expense (up to $1,000) | 17 |
Nobody plans to be here. This is the form for situations that already went wrong: a distribution taken early, a contribution over the limit, a withdrawal missed. Acting as soon as you notice is what separates a correction from a problem, because several of the reliefs depend on putting it right promptly.
Ankit Sarawagi, CPA, CA, MBA · LinkedInPart VIII, RMD Failures (25% Excise Tax)
If you are required to take an RMD from a traditional IRA or employer retirement plan and you fail to withdraw the full required amount, you owe a 25% excise tax on the shortfall. SECURE Act 2.0 reduced this from 50% to 25%, and further to 10% if the failure is corrected within two years.
| Situation | Penalty Rate |
|---|---|
| RMD not taken | 25% of the amount not distributed |
| RMD corrected within 2 years | 10% (reduced rate) |
| RMD waived by IRS for reasonable cause | 0% |
Pro Tip: File Form 5329 and attach a letter requesting waiver of the RMD penalty for reasonable cause. The IRS routinely grants first-time waivers when the shortfall is corrected promptly. Write 'RC' (reasonable cause) on line 54 and enter zero.
Part III, Excess Contributions to Traditional IRAs (6% Excise Tax)
If you contributed more than the annual IRA limit ($7,000 for 2025; $8,000 if age 50+), or contributed when you were not eligible, the excess is subject to a 6% excise tax for each year it remains in the account.
- Remove the excess (plus earnings) by the filing deadline (including extensions) to avoid the tax
- If the excess is not removed, the 6% tax applies each year until removed
- Earnings on the withdrawn excess are taxable and may be subject to the 10% early withdrawal penalty
Part IV, Excess Contributions to Roth IRAs
Same 6% excise tax applies to excess Roth IRA contributions. Use Part IV. Roth conversions and backdoor contributions have specific rules; ensure the contribution source is correctly identified.
Part IX, Excess Contributions to HSAs (6% Excise Tax)
If you exceeded HSA contribution limits, Part IX reports the 6% excise tax. Unlike IRA excess contributions, you can sometimes use the excess as your next-year contribution.
Filing Mechanics
Form 5329 is attached to Form 1040. The additional tax calculated on Form 5329 flows to Schedule 2, Part II, Line 8. If you have no other filing requirement but owe an excise tax on an excess contribution, you must still file Form 5329 as a standalone form.
Statute of Limitations
The statute of limitations for additional taxes from retirement accounts is generally 3 years from the due date of the return on which Form 5329 should have been filed. If Form 5329 was never filed, the statute may be indefinite.
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Frequently Asked Questions
Does Form 5329 need to be filed if my 1099-R already shows code 1 (early distribution)?
Yes. If an exception applies, you must file Form 5329 to claim the exception and reduce the penalty. Otherwise the IRS will assess the full 10%.
How do I report a 72(t) SEPP distribution?
Enter code 02 on Form 5329, Part I, Line 2. Attach documentation of your SEPP calculation if available.
What if I missed an RMD and corrected it in the same year?
Still file Form 5329 and request a waiver by entering 'RC' and $0 on Line 54 (penalty line). Attach a letter explaining the correction.
Can I undo an excess IRA contribution?
Yes, if you withdraw the excess plus earnings by the tax return due date (including extensions), no 6% penalty applies. The earnings are taxable.
What is the penalty for missing a Roth conversion deadline?
There is no annual contribution deadline for conversions per se, but if you contributed too much to a Roth IRA directly, the 6% excise tax applies. Conversions are not subject to annual contribution limits.
Written by
Ankit Sarawagi, CPA, CA, MBA
Ankit leads the finance team at Profitjets, where he has worked with 500+ businesses across the US on bookkeeping, tax and CFO-level strategy. He writes about the habits that keep small business books accurate all year. Connect on LinkedIn
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