What Is Form 5329: Penalties, Excess Contributions, and RMDs

IRS Form 5329 is the return you file to report and pay additional taxes on tax-favored accounts, and to claim exceptions that can reduce or wipe out those penalties. It covers three main situations: early withdrawals from retirement accounts before age 59½, contributions that exceed annual limits, and required minimum distributions you failed to take. Penalty rates on the form run from 6% to 25% depending on the violation, but many taxpayers who file it end up owing less than they feared, or nothing at all, because an exception applies.

When You Need to File

Three situations put you in Form 5329 territory. You took an early distribution from a retirement plan and qualify for an exception the IRS doesn’t already know about. You over-contributed to an IRA, HSA, Archer MSA, Coverdell ESA, or ABLE account. Or you fell short on a required minimum distribution.¹ The form also handles non-qualified distributions from 529 plans and Coverdell education savings accounts.²

There is one situation where you can skip the form. If every Form 1099-R you received shows distribution code 1 in Box 7, meaning the issuer already flagged the payment as an early distribution, and you owe the full 10% penalty with no exceptions, you can report the additional tax directly on Schedule 2 of your Form 1040 without attaching Form 5329.¹ The form becomes necessary when you need to tell the IRS something the 1099-R doesn’t already say, such as the fact that an exception applies to part or all of the distribution.

The Penalties the Form Calculates

Early distributions from qualified retirement plans and traditional IRAs before age 59½ carry an additional 10% tax on the taxable portion, on top of regular income tax.³ Part I of Form 5329 handles the math: enter the taxable amount, subtract any portion covered by an exception, and multiply what’s left by 10%.⁴

SIMPLE IRAs work differently in the first two years. Early distributions during your first two years of plan participation carry a 25% additional tax, not 10%.⁵ The two-year clock starts the date your employer first deposited contributions, not the date you opened the account.

Excess contributions trigger a 6% excise tax on the amount over the limit.⁶ The penalty compounds. You owe another 6% for every year the excess stays in the account, so two years of inaction means 12% in penalties before you touch the money again.

Missed required minimum distributions carry a 25% excise tax on the shortfall for taxpayers subject to RMDs (currently age 73, rising to 75 in 2033).⁷ That 25% drops to 10% if you fix the shortfall within a “correction window” that runs until the earliest of an IRS notice of deficiency, an IRS assessment, or the end of the second tax year after the year the penalty was triggered.⁸ In practice you generally have about two years to take the missed distribution and file a corrected 5329.

Two other rates show up on the form. Distributions from an HSA or Archer MSA that aren’t used for qualified medical expenses face a 20% additional tax, which disappears at Medicare eligibility, on disability, or at death.⁹¹⁰ Non-qualified distributions from 529 plans and Coverdell ESAs carry a 10% additional tax on the earnings portion only. Your original contributions come back free of tax and penalty.

Exceptions to the 10% Early Withdrawal Penalty

Federal law lists a long set of situations where you can take an early distribution without owing the 10%. To claim one, enter a two-digit code on line 2 of Form 5329.¹¹ If more than one exception applies to different portions of the same distribution, use code 99. The most common exceptions:

Separation from service at age 55 or later, code 01. Applies to employer plans, not IRAs. Public safety employees and certain firefighters qualify at 50.
Substantially equal periodic payments, code 02. Once started, they generally must continue for five years or until age 59½, whichever is longer.
Total and permanent disability, code 03. A physician must determine the condition will result in death or last indefinitely and prevents substantial work.
Death, code 04. Distributions to a beneficiary after the account holder dies.
Unreimbursed medical expenses exceeding 7.5% of adjusted gross income, code 05.
Qualified higher education expenses for you, your spouse, children, or grandchildren, code 08. IRAs only.
First-time home purchase, code 09. Up to $10,000 lifetime from an IRA for buying, building, or rebuilding a first home. IRAs only.
IRS levy on the retirement account, code 10.

Watch the account-type split. The homebuyer and higher education exceptions apply only to IRAs, not to 401(k) or 403(b) plans. The separation-from-service exception works the opposite way, applying only to employer plans and not to IRAs. Getting this backward is one of the most common Form 5329 errors.

Newer Exceptions Under SECURE 2.0

The SECURE 2.0 Act added several penalty exceptions starting in 2024, and many taxpayers don’t yet know they exist. Unless noted, these apply to both employer plans and IRAs.

Terminal illness, code 18. A physician (MD or DO other than you) must certify an illness reasonably expected to result in death within 84 months, and the plan administrator needs the certification before releasing funds.⁵
Birth or adoption, code 19. Up to $5,000 per child, taken within one year of the birth or finalized adoption. Attach a statement with the child’s name, age, and taxpayer identification number.¹¹
Domestic abuse victim. Up to the lesser of $10,000 or 50% of the account balance, for a participant who has experienced abuse by a spouse or domestic partner.⁵
Emergency personal expenses. Up to $1,000 per calendar year for unforeseeable personal financial emergencies. You can’t take another emergency distribution until you’ve repaid a prior one or three years have passed.¹²

Each of these new exceptions carries a three-year repayment option. Put the money back within that window and the distribution is treated as if it never happened for tax purposes. The older exceptions don’t offer that.

Fixing Excess Contributions Before the Penalty Hits

The 6% excise tax on excess contributions is one of the few Form 5329 penalties you can avoid entirely. Withdraw the excess and any earnings it produced before the due date of your return, including extensions, and no 6% is owed.¹³ For calendar-year filers, that generally means mid-October if you file an extension. The earnings you pull out are taxable income for the year the contribution was made.

Your custodian will issue a 1099-R for the corrective distribution. Box 7 will show code 8 if the excess is taxable in the current year, or code P if it’s taxable in a prior year.¹⁴ Miss the deadline and the 6% keeps compounding each year until the excess is cleared, meaning a Form 5329 every year until it’s gone. Applying the excess against a future year’s contribution limit is an option, but you still owe 6% for every year it sat in the account.

Missed RMDs and the Reasonable Cause Waiver

Beyond the correction window that cuts the RMD penalty from 25% to 10%, the IRS can waive the tax entirely for reasonable cause. File Form 5329 with a written statement explaining what went wrong and what you’ve done to fix it. On the dotted line next to line 54, write “RC” followed by the shortfall amount in parentheses, and subtract that amount from the penalty on that line.¹ Pay any remaining tax due. The IRS will notify you if the waiver is denied. Custodian errors, serious illness, and incorrect advice from a financial advisor are among the reasons that tend to succeed.

Take the missed distribution before you file the waiver request. The reasonable-cause standard requires showing you are taking steps to correct the shortfall, not just explaining it.

Records You’ll Need

The starting document is Form 1099-R from your plan custodian. Box 1 shows the gross distribution and Box 7 contains the distribution code.¹⁴ If Box 7 already reflects your exception (code 2 for a known exception, code 3 for disability, code 4 for death), the form is often unnecessary. Form 5329 is required specifically when the 1099-R code doesn’t match your situation.¹

For excess contribution calculations, gather your total contributions across all accounts of the same type and your year-end account values. For an RMD shortfall, you need the prior year-end balance of each account subject to RMDs and records of what you actually withdrew. If you’re claiming an exception, keep the underlying proof (medical records, closing documents, tuition bills, physician certifications). You don’t file the proof with the form, but you need it if the IRS follows up.

How to File

Most people attach Form 5329 to their Form 1040. Tax software handles it automatically once you enter the distribution details, and the additional tax flows to Schedule 2, line 8.⁴

If you aren’t otherwise required to file a federal return, you can send Form 5329 by itself. A standalone paper filing must be signed, dated, and mailed to the IRS processing center listed in the instructions for your state.¹ That option matters for retirees and low-income filers who don’t file a 1040 but still owe an excise tax or want to claim a waiver.

What Happens If You Skip It

Failing to file when you owe an excise tax doesn’t make the tax disappear. Failure-to-file penalties run 5% of the unpaid tax per month, up to 25%.¹⁵ Interest accrues at the federal underpayment rate, which stands at 6% for individuals in the first half of 2026.¹⁶

The bigger issue is the statute of limitations. Form 5329 has its own assessment clock, separate from your Form 1040. File the 1040 without an attached 5329 and the three-year window closes on the income tax return, but the clock on the excise tax never starts. The IRS can come back years later and assess the penalty plus interest. Filing the form, even late, starts that clock and caps how long the IRS has to collect.

The same logic argues for filing late when you have a valid exception. If the IRS never sees the form, it has no way to know the exception applies. A late filing that claims a legitimate exception is almost always better than no filing at all.

1
Internal Revenue Service. Instructions for Form 5329 (2025)
2
Internal Revenue Service. About Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
3
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts – Section: 10-Percent Additional Tax on Early Distributions
4
Internal Revenue Service. Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
5
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
6
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
7
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
8
Legal Information Institute. 26 USC 4974(e)(2) – Definition: Correction Window
9
Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts
10
Office of the Law Revision Counsel. 26 USC 220 – Archer MSAs
11
Internal Revenue Service. 2025 Instructions for Form 5329
12
Internal Revenue Service. Certain Exceptions to the 10 Percent Additional Tax on Early Distributions
13
Internal Revenue Service. IRA Year-End Reminders
14
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
15
Internal Revenue Service. 20.1.2 Failure To File/Failure To Pay Penalties
16
Internal Revenue Service. Internal Revenue Bulletin: 2026-08