When Should You Use Form 5329?

 

Editor’s Note: How much of an early distribution can I take from my IRA without having to pay the 10% penalty? This post explains the answer.

IRA withdrawlUnless you qualify for a retirement-plan early-distribution penalty exception, you must pay the 10% additional tax for IRA amounts you withdrew before age 59 1/2.

You’ll claim the exception on form 5329.

IRS Form 5329 Exceptions

Form 5329 exceptions and their codes for IRAs are:

  • 02 — Distributions made as part of a series of substantially equal periodic payments — made at least annually. These distributions must be for:
    • Your life or life expectancy
    • The joint lives or joint life expectancies of you and your designated beneficiary

If the distributions are from an employer plan, payments must begin after separation from service.

  • 03 — Distributions due to total and permanent disability
  • 04 — Distributions due to death. This doesn’t apply to modified endowment contracts.
  • 05 — Qualified retirement plan distributions that:
    • Were used to pay deductible unreimbursed medical expenses
    • Exceed 7.5% of your adjusted gross income (AGI)

You don’t have to itemize your deductions to claim the exception.

  • 07 — IRA distributions made to individuals who were on unemployment compensation for 12 consecutive weeks to pay for health insurance premiums
  • 08 — IRA distributions made for qualified higher-education expenses
  • 09 — IRA distributions made to purchase your first home, up to $10,000
  • 10 — Distributions due to an IRS levy on the qualified retirement plan or IRA account
  • 11 — Qualified distributions to reservists while serving on active duty for at least 180 days
  • 12 — Other — see Form 5329 instructions. Also, use this code if more than one exception applies.

Form 5329 Instructions

To view Form 5329 instructions, visit IRS.gov.

Note: Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the early distribution penalty for distributions from retirement accounts does not apply to any coronavirus related distribution up to $100,000, for distributions made between January 1 and December 31, 2020.

Want More Help With Form 5329?

If you’re looking for more help with tax reporting using Form 5329, get the help of H&R Block. Drop off, file online, or work with a tax pro remotely—it’s up to you!

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