IRS Form 5329 is the form you use to calculate and report additional taxes on retirement accounts, health savings accounts, and other tax-favored accounts. You file it whenever you owe a penalty for taking money out too early, contributing more than the annual limit, missing a required minimum distribution, or spending HSA funds on something other than medical care. You also file it to claim an exception when one of those penalties would otherwise apply.
The form does two jobs. It calculates what you owe, and it tells the IRS why you don’t owe more. Both matter, because skipping the form when you should have filed it can extend how long the IRS has to come back and assess a tax.
When You Actually Need to File
Most people encounter Form 5329 in one of four situations: an early withdrawal from a retirement account, an over-contribution to an IRA or HSA, a missed RMD, or a non-qualified HSA distribution. If any of those apply and no exception erases the penalty, you owe an additional tax and the form is how you report it.
There’s one narrow shortcut. If your 1099-R shows distribution code 1 in box 7 and you owe the full 10% additional tax on every early distribution you received that year, you can report the tax directly on Schedule 2 (Form 1040), line 8, without filing Form 5329.1Internal Revenue Service. Instructions for Form 5329 The moment any exception applies to any part of a distribution, that shortcut is gone. You need the form to show the IRS which exception you’re claiming and for how much.
The 10% Early Distribution Penalty
Money pulled from a qualified retirement plan or IRA before age 59½ generally carries an additional tax of 10% on the taxable portion of the distribution.2Internal Revenue Service. Topic No. 558, Additional Tax on Early Distributions From Retirement Plans Other Than IRAs That 10% is on top of the regular income tax you owe on the withdrawal itself.
If an exception applies, you still report the distribution on Form 5329 and enter the exception code. The form is your record of why you didn’t pay the full penalty. Some exceptions cover any retirement account; others are limited to IRAs or to employer plans, and picking the wrong category won’t stand up.
Substantially Equal Periodic Payments (72(t))
You can take a series of roughly equal payments based on your life expectancy without owing the 10% penalty. Once you start, you cannot change the payment amount until the later of five years from your first payment or the date you turn 59½.3Internal Revenue Service. Substantially Equal Periodic Payments Break the schedule early and the IRS applies the 10% penalty plus interest retroactively to every distribution you took under it. The exception works for both IRAs and employer plans.
Medical, Education, and First Home
Unreimbursed medical expenses above 7.5% of your adjusted gross income qualify for the exception, and only the amount above that floor counts.4Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions This one covers both account types.
Qualified higher education expenses for you, your spouse, or your children and grandchildren also escape the penalty, but only from an IRA. A 401(k) withdrawal for tuition doesn’t qualify.5Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
A first-time home purchase gets you up to $10,000 penalty-free from an IRA. The $10,000 is a lifetime cap. The money must be used within 120 days, the buyer can be you, a spouse, a child, grandchild, or parent, and “first-time” means no main home ownership in the prior two years.4Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions IRAs only.
Other Common Exceptions
- Separation from service in or after the year you turn 55, from that employer’s plan. Age 50 for qualified public safety employees. Does not apply to IRAs.
- Total and permanent disability. Both account types.
- Death of the account owner. Distributions to a beneficiary are never subject to the 10% penalty.
- Distributions to an alternate payee under a Qualified Domestic Relations Order, typically from a divorce. Employer plans only.
- An IRS levy on the retirement account.
- Federally declared disasters: qualified individuals can withdraw up to $22,000 penalty-free, from either account type, with three years to repay.4Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
SECURE 2.0 Additions
Three newer exceptions are worth flagging because they cover situations that used to have no relief.
Terminal illness. A physician’s certification that you’re expected to die within 84 months, obtained at or before the distribution, exempts the withdrawal from the 10% penalty. Both IRAs and employer plans.6Internal Revenue Service. Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
Emergency personal expenses. One withdrawal of up to $1,000 per calendar year for unforeseeable personal or family emergencies. You self-certify. You have three years to repay, and generally can’t take another emergency distribution from the same plan during that window unless you repay or make it up through contributions.6Internal Revenue Service. Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
Domestic abuse. A victim of abuse by a spouse or domestic partner can take a penalty-free distribution within one year of the abuse, up to the lesser of $10,000 (indexed for inflation) or 50% of the vested account balance. Three years to repay.6Internal Revenue Service. Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
Excess Contributions and the 6% Recurring Tax
Contribute more than the annual limit to an IRA, HSA, Coverdell ESA, or Archer MSA and the excess amount is hit with a 6% excise tax every year it stays in the account.7Internal Revenue Service. Form 5329 – Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts The recurring nature is what makes it painful. A forgotten excess contribution can compound penalties for years.
To avoid the 6% entirely, remove the excess plus any earnings it generated by your tax filing deadline, extensions included. Miss that window and you owe the 6% for the year, reported on Form 5329. You can leave the excess in and apply it toward the following year’s contribution, but the 6% still applies for each year it sat in the account before being absorbed.
Missed RMDs and the Correction Window
Starting at age 73, you must take required minimum distributions each year from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts.8Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Fall short and the shortfall is subject to a 25% excise tax.9Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
That 25% drops to 10% if you correct the mistake within the correction window. The window opens when the tax is imposed and closes at the earliest of three events: the IRS mails you a notice of deficiency, the IRS formally assesses the tax, or the last day of the second tax year after the year you missed the RMD.9Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans Miss a 2026 RMD and you generally have until the end of 2028 to take the distribution and qualify for the 10% rate.
The correction steps are straightforward. Withdraw the shortfall as soon as you find the error. File Form 5329 for the year you missed the distribution. If you want the penalty waived entirely, attach a letter explaining that the failure was due to reasonable error and describing what you’ve done to fix it. The IRS grants these waivers fairly regularly when the facts show genuine inadvertence.
HSA Withdrawals Not Used for Medical Expenses
HSA withdrawals that don’t cover qualified medical expenses are taxable income and carry a 20% additional tax.10Office of the Law Revision Counsel. 26 USC 223 – Health Savings Accounts You calculate the penalty on Form 5329. The 20% goes away after you turn 65, become disabled, or die. Post-65 non-medical withdrawals are still taxable, just without the extra 20%.
Why File Even When You Owe Nothing
There’s a real reason to file Form 5329 in years you don’t think a penalty is owed: it starts the statute of limitations clock. A filed Form 5329 showing zero generally gives the IRS three years from the filing date to challenge your position. Skip it and file only your 1040, and the IRS may have up to six years to come back and assess a penalty, particularly on excess contribution issues.
This defensive filing matters most for anyone taking RMDs. If your calculation of the required amount turns out slightly wrong, a timely-filed Form 5329 limits how far back the IRS can reach. Without it, that door stays open much longer.
How to File the Form
Most of the time, Form 5329 rides along with your annual Form 1040, 1040-SR, or 1040-NR. The penalty calculated on the form flows to Schedule 2, line 8, and adds to your total tax.1Internal Revenue Service. Instructions for Form 5329
If you aren’t otherwise required to file an income tax return but still owe a penalty, or you’re requesting an RMD waiver for a prior year, you can file Form 5329 by itself. Standalone filings cannot be submitted electronically. Include your address on page 1, sign and date page 3, and mail the form with any payment or explanation letter to the address in the instructions.1Internal Revenue Service. Instructions for Form 5329 This usually comes up with a late-corrected missed RMD or an excess contribution penalty that keeps recurring.