Form 5329 - 2020 Tax Year Checklist
Form 5329 for the 2020 tax year is used to calculate additional taxes on qualified retirement plans and other tax-favored accounts when statutory requirements are not met. It supports federal tax returns by isolating excise tax computations that do not automatically flow from pension and annuity income reporting on Form 1040.
For 2020, the most significant considerations include early distributions, excess contributions, the waiver of required minimum distribution obligations, and coronavirus-related distributions governed by separate reporting rules. This checklist follows Internal Revenue Service guidance and aligns with Publication 590-A, Publication 590-B, Publication 575, and federal tax laws applicable to the 2020 tax year.
Scope and Purpose of Form 5329 for 2020
Form 5329 reports additional taxes associated with Individual Retirement Arrangements, qualified plans, and other tax-advantaged retirement savings plan structures when contribution, distribution, or timing rules are violated. It applies to traditional IRAs, Roth IRA accounts,
SIMPLE IRAs, qualified retirement accounts, and specific education savings accounts.
The form does not replace income tax reporting or calculate state taxes, business income, or capital gains unrelated to retirement accounts. Its sole purpose is to compute excise tax liabilities, document exceptions, and support waiver treatment where the Internal Revenue Code permits relief.
Accounts and Issues Commonly Addressed in 2020
During the 2020 tax year, Form 5329 commonly applies to early distributions, excess IRA contributions, and minimum required distributions from retirement plans. It may also apply to
Health Savings Account activity, Archer medical savings accounts, Coverdell Education Savings
Account contributions, and ABLE account-related excess issues.
Special rules enacted during 2020, including coronavirus-related distributions, created additional reporting complexity that must be handled outside Form 5329. Understanding which issues belong on Form 5329 versus other IRS forms is essential for accurate tax return preparation.
Ten-Step Checklist for Form 5329 (2020)
Step 1: Identify whether coronavirus-related distribution rules apply
Determine whether the taxpayer received coronavirus-related distributions from qualified retirement plans during 2020 and met the CARES Act definition of a qualified individual. If
applicable, report those distributions using Form 8915-E rather than treating them as early distributions on IRS Form 5329.
Step 2: Confirm exposure to the 10 percent additional tax on early
distributions
Review retirement account activity to identify distributions received before age 59½ from traditional IRAs, Roth IRA accounts, SIMPLE IRAs, or other qualified plans. Isolate the taxable portion of those early distributions because additional taxes generally apply only to amounts included in income.
Step 3: Apply valid exceptions to early distribution penalties
Evaluate whether an exception under federal tax regulations applies, such as disability, qualified medical expenses, substantially equal periodic payments, or specific IRA-only exceptions.
When an exception applies and is not reflected on Form 1099-R, claim it using Part I of Form
5329.
Step 4: Apply the 2020 waiver of Required Minimum Distributions correctly
Confirm whether minimum required distributions were waived for the retirement account involved during calendar year 2020 under pandemic-related relief. If an RMD was waived, do not calculate an excise tax or report a missed distribution for that year.
Step 5: Use the correct excise tax rates for non-waived RMD situations
If Form 5329 is used to address RMD issues not covered by the 2020 waiver, apply the excise tax rate specified in the 2020 instructions rather than later reduced rates. Complete only the
RMD-related section applicable under the 2020 framework and avoid mixing later-law penalty concepts.
Step 6: Report excess contributions to traditional IRAs in the proper
section
Determine whether IRA contributions exceeded the applicable contribution limit for 2020 after applying eligibility and compensation rules. Report any uncorrected excess traditional IRA contributions in Part III of Form 5329 and compute the ongoing excise tax when required.
Step 7: Report excess contributions to Roth IRAs correctly
Verify Roth IRA eligibility using 2020 income thresholds and filing status rules, then calculate any excess contributions remaining after timely corrections. Report those excess amounts in
Part IV of Form 5329 and apply the excise tax until the excess is eliminated.
Step 8: Address Coverdell ESA and Archer MSA excess contributions
Confirm whether contributions to a Coverdell Education Savings Account or Archer MSA exceeded statutory limits for 2020. Use the account-specific sections of Form 5329 to calculate the excise tax when excess contributions remain uncorrected.
Step 9: Distinguish qualified charitable distributions from pandemic relief
Ensure qualified charitable distributions are not confused with coronavirus-related distributions, as they are governed by different rules and reporting mechanisms. Handle QCDs through proper income exclusion reporting rather than attempting to resolve them through Form 5329.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: File Form 5329 with the correct return and deadline
Attach Form 5329 to Form 1040 unless filing it separately is specifically permitted due to no other filing requirement. Confirm the applicable tax filing deadline for the 2020 tax year, including pandemic-related postponements and extensions.
Documentation and Final Review
Retain Forms 1099-R, Form 8606, Form 8889, Form 8853, and IRA custodian statements supporting distributions, contributions, and corrections. These records should substantiate exception claims, excess contribution removals, and any waiver requests associated with additional taxes.
Before filing, verify that each Form 5329 part aligns with the correct account type, issue category, and 2020 tax regulations. Using the correct version of IRS Form 5329 and following the Internal Revenue Service's instructions reduces processing delays and minimizes the risk of
IRS penalty notices.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
