What IRS Form 5329 (2015) Is For
Retirement plan account owners use IRS Form 5329 (2015) to report penalties on retirement accounts when withdrawals, contributions, or distributions do not follow IRS rules. It applies to traditional IRAs, Roth IRAs, SIMPLE IRA accounts, SEP IRAs, 401(k) plans, 403(b) plans, and other retirement plans where distributions may increase taxable income. The form also helps document excise tax on excess IRA contributions when they are not timely corrected.
The form is required when an account holder takes early withdrawals, exceeds annual limits on Roth IRA contributions or traditional IRA contributions, or fails to take a required minimum distribution. It is also used when a retirement account’s December 31 account balance must be reviewed to calculate a penalty or when a beneficiary must follow rules after the owner’s death. Filing ensures accurate reporting on a federal tax return and maintains compliance with tax law for the retirement account.
When You’d Use IRS Form 5329
A taxpayer uses the form when a distribution from a traditional IRA, Roth IRA, or other individual retirement account is subject to an additional tax or requires an exception from taxation. This includes situations involving early withdrawals, excess contributions, or an inherited retirement plan where a spouse or other beneficiary must follow distribution rules. It also applies when an account owner is required to withdraw money under exceptional circumstances specified by the IRS.
Form 5329 is necessary if required minimum distributions were not taken for a prior year or if the first required minimum distribution was missed. A taxpayer may also need the form when calculating penalties for more than one account, as some plans allow combining withdrawals, while others require them to be taken as RMDs separately. It is also used when the IRA custodian reports distributions that were subject to tax but require additional documentation to support the tax liability.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Individual Credit & Deduction Forms.
Key Rules or Details for 2015
The 2015 version of the form covers penalties for early distributions, excess contributions, and missed required minimum distributions from retirement accounts. Early withdrawals from traditional IRAs or Roth IRAs before age 59½ are generally subject to a penalty unless an exception applies. Excess contributions to retirement accounts result in an excise tax that remains until the correct amount is withdrawn.
The form requires calculating the required minimum distribution using the prior year account balance and the IRS life expectancy factor. Distribution penalties may apply when withdrawals are not taken by the RMD deadline or when RMD rules require the account owner to divide the total amount using their own life expectancy. Taxpayers may request relief for a reasonable error when the mistake is corrected quickly.
Step-by-Step (High Level)
Part I: Early Distributions
- Review Form 1099-R to determine whether the distribution was taken before the qualifying retirement age.
- Calculate the portion of the distribution that is subject to penalty.
- Enter an exception code when the early withdrawal qualifies for relief under IRS rules.
- Report the penalty amount that will be included on the federal tax return.
Part II: Education and ABLE Accounts
- Review distributions from Coverdell accounts or 529 plans that were not used for qualified expenses.
- Identify exceptions such as scholarships, disability, or the beneficiary’s death.
- Calculate any additional tax that applies to non-qualified withdrawals.
Parts III–VIII: Excess Contributions
- Review contribution limits for traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRA accounts, HSAs, and related plans.
- Calculate excess contributions by comparing the total contributions to the annual limits.
- Determine the excise tax owed if the excess was not timely corrected.
- Report any distributions that reduce excess contributions for the year.
Part IX: Required Minimum Distributions
- Determine the prior year account balance for each retirement account subject to RMD rules.
- Use the IRS life expectancy factor to calculate the required minimum distribution.
- Report the shortfall when less than the required minimum was withdrawn.
- Attach a statement requesting a waiver when a reasonable error occurred and corrective steps were taken.
For more information about IRS assistance, including help with your tax questions and payment options, see this comprehensive guide.
Common Mistakes and How to Avoid Them
- Misunderstanding when early distribution penalties apply: A taxpayer must document a valid exception and file Form 5329 to ensure the penalty is correctly waived.
- Incorrectly handling excess contributions: A taxpayer must remove both the excess and any related earnings and report them properly to avoid additional excise tax.
- Miscalculating required minimum distributions: A taxpayer must use the correct life expectancy table and calculate RMDs separately for each applicable account.
- Using the wrong year of Form 5329: A taxpayer must file the version that corresponds to the specific tax year to ensure proper penalty calculation.
What Happens After You File
After the form is filed, the IRS reviews whether the penalty was calculated correctly and whether the reported income matches the income reported on the federal tax return. Any penalty for early withdrawals, excess contributions, or missed required minimum distributions becomes part of the total taxes owed. The IRS may request additional information when the distribution affects taxable income across multiple accounts.
The IRS may request documentation when a waiver or exception applies, primarily when net income attributable calculations or limited-based corrections affect future-year reporting. Taxpayers must pay any taxes due by the extended due date to avoid further penalties. They may seek guidance from a tax advisor when contribution limit issues or complications arise with profit-sharing plans.
FAQs
What is IRS Form 5329 (2015) used for?
IRS Form 5329 2015 is used when retirement plan account owners report penalties on retirement accounts, including early withdrawals, excess IRA contributions, or missed required minimum distributions. It ensures the IRS can calculate the correct amount of tax based on income and distributions.
When does an account owner need the form for a traditional IRA or Roth IRA?
An account owner needs the form when a distribution from a traditional IRA or Roth IRA affects taxable income or requires an exception to a penalty. It also applies when an IRA custodian reports withdrawals from retirement accounts that must be reviewed under IRS rules.
How is the required minimum distribution calculated?
The required minimum distribution calculated for 2015 uses the prior year account balance and the IRS life expectancy factor. The RMD amount ensures retirement plans follow RMD rules and prevents excise tax when withdrawals meet the minimum amount.
Does the form apply to a beneficiary after the owner’s death?
Yes, beneficiaries may need the form when managing an inherited retirement account. A spouse or other beneficiary follows RMD rules based on age or own life expectancy and reports distributions from traditional IRAs, Roth IRAs, or 403(b) plans.
What happens if someone misses the first required minimum distribution?
A taxpayer must calculate the missed RMD amount and request relief when a reasonable error applies. The IRS reviews whether the RMD was corrected, whether the entire balance was addressed, and whether future withdrawals will meet required minimum distributions.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
