Instructions for Form 5329 - 2023 Tax Year Checklist
Form 5329 supports tax returns by reporting additional taxes tied to a tax-favored account when
an IRS penalty is not fully determined through Distributions from Pensions and Form 1099-R coding. It is commonly filed with Form 1040, Form 1040-SR, Form 1040-NR, or Form 1041 for the tax year.
This checklist covers early distributions, excess contributions, and minimum required distributions for qualified retirement plans and Individual Retirement Arrangements under the
2023 rules. It also references records such as Form 8606, Form 8853, and IRA custodian statements for earnings calculations and market-value support.
Confirm Whether Form 5329 Is Required for 2023
Form 5329 is required when additional taxes apply, and the filer must compute them directly rather than relying only on distribution codes or summary pension and annuity income reporting.
Common triggers include early distributions, excess IRA contributions, or an excise tax tied to a required minimum distribution shortfall.
The form is usually attached to federal tax returns by the tax-filing deadline, including extensions, using the same identifying information shown on Form 1040-series returns. If no income tax return is required, Form 5329 may be filed by itself using paper procedures and the instructions for that form number.
Gather Inputs and Classify Accounts Before Calculating
Forms 1099-R should be matched to each retirement account to separate qualified plans from traditional IRAs and Roth IRAs, since exceptions and taxable amounts are subject to different tax regulations. Contribution records should also identify IRA contributions, carry-forward excess contributions, and any corrective withdrawals with dates and amounts.
Education savings accounts should be grouped separately, including Coverdell ESAs, a
Coverdell Education Savings Account, and any 529 plan distributions that may trigger additional taxes under the form’s education sections. Archer MSA activity supported by Form 8853, health savings account records, and ABLE account details should be reviewed only if an excise tax applies.
Step-By-Step Checklist
Step 1: Confirm Filing Posture and Return Attachment
Confirm whether Form 5329 will be attached to Form 1040, Form 1040-SR, Form 1040-NR, or
Form 1041 for the tax year, based on filing status and return requirements. If filing by itself, confirm paper-only procedures, signature placement, and payment steps to ensure the IRS penalty is properly assessed and credited.
Step 2: Identify Early Distributions Included in Income
Review Forms 1099-R and account statements to identify early distributions taken before age
59½ from qualified retirement accounts, Individual Retirement Arrangements, or endowment contracts. Confirm the taxable portion because additional taxes generally apply to income-included amounts rather than gross distributions or rollover amounts.
Step 3: Apply Exceptions and Codes for Early Distributions
Determine whether exceptions apply for disability, death, certain medical expenses, or other permitted categories listed in Publication 590-B and related instructions for the form. When an exception is not fully reflected on Form 1099-R, report the exception amount and code on Form
5329 to compute the correct additional taxes.
Step 4: Flag SIMPLE IRA and Other Special Rate Situations
Confirm whether an early distribution came from a SIMPLE IRA during the two-year window, because that fact pattern can change how the IRS penalty is computed. Record the taxable amount and apply the correct rate through Form 5329, keeping worksheets that support the calculation and the distribution coding.
Step 5: Compute Traditional IRA Excess Contributions
Compare IRA contributions against the annual contribution limit after applying eligibility rules, including compensation limits and any coordination with Nondeductible IRAs reported through
Form 8606. If an excess traditional IRA contribution remains at year-end, compute the excise tax and track carryforwards, as the charge can recur annually until corrected.
Step 6: Compute Roth IRA Excess Contributions
Confirm Roth IRA eligibility using modified AGI rules and then measure contributions against the allowable limit for the tax year. If an excess remains uncorrected, complete the Roth IRA section of Form 5329 and retain documentation showing the correction steps and earnings calculation.
Step 7: Address Other Excess Contribution Accounts
Review Coverdell ESAs, Archer medical savings accounts, health savings account activity, and
ABLE account contributions for excess amounts that remain in the accounts. Complete only the parts that match the account type and keep support for withdrawals, corrective timing, and market value used for the excise tax base.
Step 8: Evaluate required minimum distribution exposure
Determine whether minimum distributions are applied for 2023, including special considerations for an Inherited IRA and the 10-year rule where relevant under the SECURE 2.0 Act timing rules. Use IRA custodian statements to confirm the minimum required distributions for each account and reconcile them to distributions taken during the year.
Step 9: Compute Missed RMD Excise Tax and Waiver Request
If distributions fell short, compute the shortfall and the excise tax using the 2023 instructions, then document corrective withdrawals taken after the deadline. If requesting relief, prepare a penalty waiver request describing reasonable cause and corrective action, supported by account statements and distribution confirmations.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Transfer Amounts and Finalize Filing
Carry the computed additional taxes to the proper destination on the federal return, following line and schedule mapping in the 2023 instructions rather than relying on prior-year layouts.
Retain Forms 1099-R, Forms 5498 when available, worksheets, and related records under the statute of limitations, especially when tax software is used for e-file assembly.
Filing, Attachments, and Recordkeeping Boundaries
Form 5329 is typically filed with federal returns and should not be delayed by unrelated state taxes or by taxable brokerage account reporting that does not affect retirement penalties.
Standalone filing is reserved for cases where no income tax return is required, and the form must be signed and dated.
Supporting records should generally be retained rather than attached, including worksheets tied to Publication 590-A, Publication 590-B, Publication 560, and Publication 575 when those references informed calculations. Keep evidence for early distributions, excess contributions, mandatory distributions, and any penalty waiver request, and use the IRS Form 5329 instructions as the controlling source.
Final Review Before Submission
Confirm only the applicable parts were completed, because adding irrelevant sections can misstate additional taxes or create conflicts with other federal tax laws. Verify that early distributions in Part I reflect taxable amounts, that exception codes match documentation, and that excess contributions are mapped to the correct account sections.
Confirm RMD reporting reflects required versus distributed amounts and includes clear support for any waiver request, especially for an Inherited IRA subject to timing rules. If filing with Form
1040-series returns, confirm the amounts flow correctly in the software output, and keep a clean record set for commonly asked questions later.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
