Form 5329 Instructions: Penalties, Excess Contributions, and RMDs

The instructions for Form 5329 come down to this: file the form when something went wrong with a tax-advantaged account, complete only the part that matches what went wrong, and either calculate the excise tax you owe or claim an exception that eliminates it. The form covers IRAs, employer retirement plans, Coverdell education savings accounts, HSAs, Archer MSAs, ABLE accounts, qualified tuition programs, and modified endowment contracts.¹ Each type of mistake has its own excise tax, and this is the form where you sort it out.

When You Actually Need to File It

Not every early withdrawal requires Form 5329. If your 1099-R shows distribution code 1 in box 7 and you owe the full 10% additional tax, you can report that tax directly on Schedule 2 of Form 1040 and skip the form entirely.¹

You do need Form 5329 in three situations:

You qualify for an exception to the 10% early distribution penalty that your plan custodian did not reflect on the 1099-R.
You made excess contributions to any covered account.
You missed a required minimum distribution.

Skipping the form when it is required can backfire. The IRS may assess the penalty on its own, and without a filed form claiming the exception, you lose it by default.

How the Form Is Organized

Form 5329 has nine parts. You fill in your name, Social Security number, and address at the top, then jump straight to the part that applies.²

Part I: 10% additional tax on early distributions from IRAs, qualified retirement plans, and modified endowment contracts.
Part II: Additional tax on certain distributions from Coverdell ESAs, qualified tuition programs, and ABLE accounts.
Part III: 6% excise tax on excess contributions to traditional IRAs.
Part IV: 6% excise tax on excess contributions to Roth IRAs.
Part V: 6% excise tax on excess contributions to Coverdell ESAs.
Part VI: 6% excise tax on excess contributions to Archer MSAs.
Part VII: 6% excise tax on excess contributions to HSAs.
Part VIII: 6% excise tax on excess contributions to ABLE accounts.
Part IX: 25% excise tax on missed required minimum distributions from qualified retirement plans and IRAs.

Most filers only touch Part I or Part IX. Leave the rest blank.

Part I: Early Distributions Before 59½

Part I applies when you take money from an IRA, employer plan, or modified endowment contract before age 59½.¹ The default rate is 10% of the taxable distribution. One important exception runs the other way: a withdrawal from a SIMPLE IRA during your first two years of participation is taxed at 25%.³

The math is short. Enter total taxable early distributions on Line 1. On Line 2, enter the amount covered by an exception along with the exception code. Line 3 is Line 1 minus Line 2. Multiply Line 3 by 10% (or 25%, if applicable) on Line 4. That is your additional tax.

Common Exception Codes

Exception codes tell the IRS why part or all of your early distribution should escape the 10% penalty.⁴ The ones that come up most:

01: Separation from service during or after the year you turned 55 (50 for public safety employees in a governmental plan). Employer plans only, not IRAs.
02: Substantially equal periodic payments under an IRS-approved schedule.
03: Total and permanent disability.
04: Distribution made after the account owner’s death.
05: Unreimbursed medical expenses above 7.5% of adjusted gross income.
08: Qualified higher education expenses (IRAs only).
09: First-time home purchase, up to $10,000 lifetime (IRAs only).

If more than one exception applies to a single distribution, enter code 99 and attach a breakdown showing how much falls under each.¹

Qualified birth or adoption distributions get their own dedicated line on the form (Line 19 in the 2025 version) rather than a numbered code. You can exclude up to $5,000 per child within one year of the birth or adoption, and you must attach a statement with the child’s name, age, and taxpayer identification number.¹

Newer SECURE 2.0 Exceptions

Several penalty exceptions took effect in 2024 and 2025 and now appear on Form 5329:

Terminal illness: a physician must certify a condition expected to result in death within 84 months. No dollar cap.⁴
Emergency personal expenses: one distribution per calendar year of up to $1,000. You cannot take another emergency distribution for three years unless you repay the first one or make contributions equal to the amount withdrawn.⁵
Domestic abuse: the lesser of $10,000 (indexed for inflation) or 50% of your vested balance, if the abuse occurred within the prior 12 months. Self-certification is allowed.
Federally declared disasters: up to $22,000 for an economic loss from a qualified disaster.⁴

Each has its own line or code, and the IRS has been updating the form as these phase in. Check the current year’s instructions before picking a code.

Excess Contributions: Parts III Through VIII

When you put more into a tax-favored account than you were allowed to, the IRS imposes a 6% excise tax on the excess for every year it remains in the account.⁶ Parts III through VIII each handle a different account type, but the mechanics are identical.

For 2026, the IRA contribution limit is $7,500, plus a $1,100 catch-up if you are 50 or older.⁷ An excess contribution happens when you exceed that limit or contribute more than your taxable compensation for the year.

Add the current year’s excess to any uncorrected excess carried forward from prior years, then multiply by 6%. The tax is capped at 6% of the account’s total value on December 31 of the tax year.⁸

How to Stop the Recurring 6%

This penalty keeps hitting every year the excess sits in the account, which is what catches people off guard. There are two ways out.

Withdraw the excess plus any net income attributable to it before your tax return due date, including extensions, and you avoid the 6% for that year entirely.⁹ The earnings you pull out are taxable in the year the contribution was made.

Miss that deadline and you owe the 6% for the contribution year. You can then absorb the excess by reducing the next year’s contribution by the overage. Over-contribute $1,000 to a traditional IRA in 2025 without correcting it, and you owe $60 for 2025, then limit your 2026 contribution to $6,500 instead of $7,500. Once absorbed, the annual penalty stops.

Part IX: Missed Required Minimum Distributions

If you are 73 or older and fail to withdraw your full RMD from a qualified retirement plan or IRA, the penalty is 25% of the shortfall.¹⁰ That rate dropped from 50% under SECURE 2.0, effective for tax years beginning after 2022.

RMDs generally must begin by April 1 of the year after you turn 73.¹¹ For employer plans but not IRAs, you may delay until April 1 after the year you actually retire if the plan allows it.

Calculate each account’s RMD separately, compare the total required amount to what you actually withdrew, and enter the shortfall on Part IX. Multiply by 25%. A $6,000 shortfall produces a $1,500 penalty.

The 10% Reduced Rate

SECURE 2.0 added a correction window that cuts the penalty from 25% to 10%. To qualify, take the missed distribution and file a return reflecting the corrected tax before the earliest of three events: the IRS mails you a notice of deficiency, the IRS assesses the tax, or the last day of the second tax year after the year you missed the RMD.¹⁰ In practice, you have roughly two years to fix the mistake and file Form 5329 at the 10% rate.

Requesting a Full Waiver

The IRS can waive the Part IX penalty entirely when the shortfall was caused by reasonable error and you have already corrected it. Common reasonable-cause scenarios include a custodian processing error, serious illness that prevented you from managing finances, or bad advice from a financial institution.

To request the waiver, complete Part IX lines 52 and 53 as normal. On the dotted line next to line 54, write “RC” followed by the shortfall amount you want waived, in parentheses. Subtract that amount from your total shortfall so line 54 itself reflects only the portion you are not seeking relief on. Attach a signed statement explaining the reasonable cause and confirming you have already taken the missed distribution.¹ Pay the tax due on the non-waived portion. If the waiver is denied, the IRS will notify you and bill the rest.

Why Filing a Zero Form 5329 Can Protect You

Filing Form 5329 starts the statute of limitations clock. Skip it, and the IRS gets a longer window to assess penalties.

Under SECURE 2.0, when Form 5329 is not filed, the IRS generally has three years from the filing date of your Form 1040 (or its due date, if later) to assess an RMD excise tax for IRA shortfalls. For excess contribution penalties, that window stretches to six years if you rely on your Form 1040 as the applicable return rather than filing a separate Form 5329. Filing Form 5329 directly, even to report zero tax owed for the year, locks in the shorter period.

The practical takeaway: in years when you believe no penalty applies, consider filing Form 5329 anyway showing zero. That three-year clock starts running, and the IRS loses the ability to come back years later and second-guess your RMD compliance.

How to Submit Form 5329

If you are filing an income tax return, attach Form 5329 to your Form 1040. The additional tax flows to Schedule 2, Line 8, and becomes part of your total tax liability.

If you are filing Form 5329 by itself, either because you otherwise do not need to file a return or because you are correcting a prior year, you must mail a paper copy. The form cannot be e-filed as a standalone return.¹ Include your address on page 1, sign and date page 3, and send it to the same IRS address and by the same deadline you would use for Form 1040.

For prior-year corrections, use the version of Form 5329 for the specific tax year involved, not the current year’s form. Write the tax year at the top, complete the relevant part, and mail it with any payment due. If you are requesting an RMD waiver, include the signed reasonable-cause statement with the form and pay only the tax on the portion you are not asking the IRS to waive.

1
Internal Revenue Service. Instructions for Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
2
Internal Revenue Service. IRS Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
3
Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules
4
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
5
Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
6
Office of the Law Revision Counsel. 26 U.S. Code 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
7
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
8
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
9
Internal Revenue Service. IRA Year-End Reminders
10
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
11
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)