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!

Related Topics

Related Resources

Tax Return Mismatch

Get the facts from H&R Block about tax return mismatches, and what to do if you receive a CP2000 notice from the IRS about income missing from your return.

Affordable Care Act Penalty

Learn about the Shared Responsibility Payment, sometimes called the Affordable Care Act Penalty. Get the facts from the experts at H&R Block.

File State Tax Returns Early

Can you file your state and federal tax returns on different dates? Learn more from the tax experts at H&R Block.

Health Insurance Penalty

Learn more about the health insurance penalty and what fees you risk incurring with advice from the tax experts at H&R Block.