Question

What are the exceptions to the early withdrawal penalty?

Answer

Form 5329 exceptions to early withdrawal penalty codes are:

  • 01 — Distributions from a qualified retirement plan (not an IRA) after separation from employment and after reaching age 55
  • 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 10% (7.5% if you or your spouse was age 65 or older) of your adjusted gross income (AGI)

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

  • 06 — Qualified retirement plan (not an IRA) distribution under a qualified domestic relations order
  • 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 higher-education expenses
  • 09 — IRA distributions made to buy your first home, up to $10,000
  • 10 — Distributions due to an IRS levy on the qualified retirement plan
  • 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.

If you had economic losses as a result of certain federally declared disasters, you can exempt the 10% early distribution tax without filing Form 5329. To learn more, see Publication 590 for available disaster relief.

 

Related Topics

Related Resources

Unfiled Business Tax Returns

Does your business have unfiled tax returns? Read the IRS definition and get more insight from the tax experts at H&R Block.

Seriously Delinquent Tax Debt

If it is determined that you have seriously delinquent tax debt, your passport application may be denied. Learn more from the tax experts at H&R Block.

What is the SALT Deduction?

Learn more about the SALT Deduction, a new federal tax law that caps itemized state and local tax deductions for all filers.

Direct Deposit Tax Refund Delays

Issues with your bank account could cause tax refund delays. Learn more about direct deposit tax refunds from the tax experts at H&R Block.