Instructions for Form 5329 - 2020 Tax Year Checklist
Form 5329 is used to report additional taxes tied to a tax-favored account when those amounts
are not fully determined through pension and annuity income reporting on federal tax returns for the tax year. It most often applies to early distributions, excess contributions, and excise tax calculations under the 2020 federal tax regulations for qualified retirement plans.
For 2020, special rules apply due to the CARES Act, including the treatment of coronavirus-related distributions and the temporary waiver of minimum required distributions.
This checklist reflects only the 2020 law and directs disaster-related reporting to the appropriate
Form 8915 series.
When Form 5329 Is Required for 2020
Form 5329 is required when additional taxes must be calculated directly rather than flowing automatically from Form 1099-R or other IRS forms. Common triggers include early distributions without proper exception coding, excess IRA contributions, or excise tax exposure tied to certain education or health accounts.
The form is generally filed with Form 1040, Form 1040-SR, or Form 1040-NR for the tax year. If no income tax return is required, Form 5329 may be filed by itself using standalone filing procedures.
Records and Account Classification Before Calculations
Forms 1099-R should be carefully reviewed to identify distributions from traditional IRAs, Roth
IRA accounts, and employer retirement plans, as qualified plans follow different exception and penalty rules. IRA custodian statements should confirm taxable amounts, contribution activity, and whether amounts were rolled over or recontributed.
Education savings accounts such as Coverdell ESAs, Archer MSA activity supported by Form
8853, and Health Savings Account records should be separated from retirement accounts.
ABLE accounts and other tax-advantaged accounts should be reviewed only if additional taxes apply under the 2020 instructions.
Step-By-Step Checklist
Step 1: Confirm Filing Requirement and Return Attachment
Determine whether additional taxes apply for the tax year based on early distributions, excess contributions, or other penalty-triggering events tied to qualified retirement accounts. Confirm
whether Form 5329 will be attached to Form 1040 or filed by itself, and verify that the tax filing deadline or extension applies correctly.
Step 2: Identify Early Distributions Includible in Income
Review Form 1099-R and supporting records to identify early distributions taken before age
59½ from retirement plans or individual retirement arrangements. Confirm the taxable portion because additional taxes apply only to amounts included in income, excluding qualified disaster distributions.
Step 3: Apply Exceptions to the 10 Percent Additional Tax
Determine whether an exception applies for disability, death, substantially equal periodic payments, education expenses, or other permitted categories under the 2020 tax regulations.
Enter the exception amount and code on IRS Form 5329 when relief is not fully reflected on
Form 1099-R.
Step 4: Exclude Coronavirus-Related Distributions Properly
Confirm whether any 2020 distributions qualify as coronavirus-related distributions under the
CARES Act and are therefore exempt from the 10 percent additional tax. Report those distributions using the applicable Form 8915 series rather than Form 5329, while tracking recontribution rights separately.
Step 5: Review Traditional IRA and Roth IRA Contribution Limits
Verify combined IRA contributions against the annual contribution limit for the tax year, including catch-up amounts when applicable. Exclude SEP and SIMPLE IRA employer contributions from this calculation because those follow separate retirement plan limits.
Step 6: Compute Excise Tax on Excess Contributions
If excess contributions remained in an account at year-end, compute the excise tax and recognize that it may apply for each year the excess remains uncorrected. Confirm whether corrective withdrawals were made by the applicable deadline, because timely correction can eliminate recurring IRS penalty exposure.
Step 7: Apply Coverdell ESA Excess Contribution Rules
Review Coverdell Education Savings Account contributions to determine whether excess amounts exist and whether they were withdrawn by the applicable June deadline. Use the
Coverdell-specific section of Form 5329 to compute any excise tax tied to excess contributions.
Step 8: Apply the 2020 RMD Waiver Correctly
Confirm that minimum required distributions were waived for calendar year 2020, including for individuals with a required beginning date during that year. Do not calculate an excise tax for missed distributions that fall within the scope of the 2020 waiver.
Step 9: Transfer Additional Taxes to the Correct Location
After completing all applicable sections, carry the additional taxes to Schedule 2 of Form 1040 as required for 2020 federal returns. Confirm totals align with IRS Form 5329 calculations rather than assuming a single universal transfer line applies.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Retain Documentation and Finalize Filing
Retain Form 1099-R, Form 8606, IRA custodian statements, and worksheets supporting exception claims or corrections. File the completed form by the applicable tax-filing deadline and retain records for statute of limitations support.
Disaster and Coronavirus Relief Reporting Reminder
Qualified disaster distributions, including coronavirus-related distributions, are not subject to the early distribution penalty for 2020 under Internal Revenue Code provisions. Detailed eligibility rules and income inclusion elections are reported through the applicable Form 8915 series rather than IRS Form 5329.
The three-year recontribution period allows relief actions to occur after 2020, even though the distribution itself is tied to 2020 eligibility. Careful recordkeeping is essential to track repayment timing and income adjustments.
Closing Notes and Recordkeeping Reminders
For the 2020 tax year, retain complete records supporting any Individual Retirement Account activity reported on Form 5329, including early withdrawals, excess contributions, and minimum distributions calculations. Documentation should clearly reflect how amounts were determined under federal tax laws and be organized in case the Internal Revenue Service requests clarification.
If the return involves education accounts or transactions connected to an Achieving a Better Life
Experience program, keep account statements, distribution details, and exception support with the tax file. Maintaining a consolidated record set ensures Form 5329 entries align with the main return and support accurate compliance for future tax years.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
