What Form 5329 (2014) Is For
IRS Form 5329 (2014) is used to report additional taxes on early distributions, excess contributions, and missed required minimum distributions from qualified retirement plans and other tax-favored accounts. The IRS applies these penalties when a taxpayer withdraws funds too early, contributes more than the allowed amount, or fails to take a required distribution. These rules apply to traditional IRAs, Roth IRAs, SIMPLE IRAs, profit-sharing plans, and other qualified plans that receive special tax treatment.
Taxpayers must file this form for the 2014 tax year when they owe additional tax or need to claim an exception to the early distribution penalty. The form also applies when an excess contribution to a traditional IRA or Roth IRA remains in the account past the tax filing deadline. When filing late or amending a return, taxpayers must use the correct version of Form 5329 for the specific tax year in which the return is being filed.
When You’d Use Form 5329
A taxpayer files this form when early distributions from a retirement plan or IRA are subject to a penalty, or when Roth IRA contributions or traditional IRA contributions exceed the allowed limits. It also applies when a modified adjusted gross income prevents a taxpayer from contributing to a traditional or Roth IRA, resulting in an excess contribution to an IRA.
Form 5329 must be filed, even if a full tax return is not completed, when the IRS requires reporting for excess IRA contributions or missed withdrawals. It is also used when correcting a prior-year issue through an amended return or when an excess contribution involves income earned in a subsequent year.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Individual Credit & Deduction Forms.
Key Rules or Details for 2014
For the 2014 tax year, the annual contribution limit for traditional and Roth IRAs was $5,500, or $6,500 for IRA owners age 50 or older. Excess amounts created an excess contribution that triggered a 6 percent penalty each subsequent year until the issue was corrected. Taxpayers needed to calculate earnings to determine the earnings portion using the adjusted opening balance and adjusted closing balance.
Roth IRA contributions depended on modified adjusted gross income, while contributions to a traditional IRA required taxable compensation or earned income for the calendar year. When an exception applies, early distributions may avoid penalty, but ordinary income taxes still apply and must be reported on the tax return.
Step-by-Step (High Level)
Step 1: Identify the sections that apply
The taxpayer reviews early distributions, excess contributions, and required minimum distributions for 2014 to decide which parts of the form to complete.
Step 2: Report early distributions
The taxpayer enters the total distributions and identifies the taxable portion of the distributions. When an exception applies, the taxpayer enters the exception code and the amount not subject to penalty.
Step 3: Calculate excess contributions
The taxpayer determines whether excess contributions occurred in a traditional IRA or Roth IRA. This may require calculating the adjusted opening balance, adjusted closing balance, original contribution amount, and earnings portion to find the net income attributable to the excess. The custodian’s calculations may be used when available.
Step 4: Report missed required minimum distributions
The taxpayer enters the amount required, the amount taken, and the shortfall. When requesting a waiver, the taxpayer must attach an explanation.
Step 5: Transfer totals to the tax return
The taxpayer includes all additional taxes on the 2014 income tax return. When filing Form 5329 by itself, payment must be included.
Common Mistakes and How to Avoid Them
- Not removing excess contributions by the deadline: Excess contributions — including the earnings on those contributions — must be withdrawn by the tax filing deadline to avoid recurring penalties.
- Miscalculating balances or net income attributable (NIA): Errors in the adjusted opening balance, adjusted closing balance, or NIA are common; reviewing the custodian’s calculations or consulting a tax advisor helps ensure accuracy.
- Assuming all Roth IRA withdrawals are penalty-free, early distributions may be taxable and subject to penalties unless the age and holding-period requirements or a valid exception apply.
- Using the wrong tax year’s Form 5329: Corrections for the 2014 tax year must be reported on the 2014 version of Form 5329, even when filed in a later year.
What Happens After You File
After IRS Form 5329 2014 is filed, the IRS reviews the entries to determine whether additional taxes apply for early distributions, excess amounts, or missed distributions. If an excess contribution remains after filing, the taxpayer must continue to report it in future years until it is fully corrected under tax law.
The IRS may request documentation when a waiver or exception applies, mainly 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 with profit-sharing plans arise.
FAQs
What situations require filing IRS Form 5329 (2014)?
A taxpayer files IRS Form 5329 in 2014 when early distributions, excess contributions, or missed withdrawals from traditional IRAs, Roth IRAs, or qualified plans occur during the tax year. The IRS requires reporting when an excess amount or excess contribution remains past the tax filing deadline.
How does someone correct excess IRA contributions?
An excess IRA contribution is corrected by removing the original contribution amount and the earnings portion before the extended due date. When an excess contribution involves net income attributable, the taxpayer may need to calculate earnings using the adjusted opening balance and adjusted closing balance.
When can a Roth IRA contribution cause penalties?
A Roth IRA contribution may result in penalties when modified adjusted gross income exceeds the allowable IRA contribution limit. If excess IRA contributions stay in the account, the taxpayer must continue reporting excess amounts in future years until fully corrected under tax law.
Do required minimum distributions affect Form 5329?
Required minimum distributions from a traditional IRA or qualified retirement plan must be reported when missed, as ordinary income taxes may apply. When an exception applies, the IRS may waive penalties; however, the taxpayer must demonstrate corrective action and file a timely return or amended return.
How does income earned affect IRA contribution limits?
IRA owners may contribute only when earned income or taxable compensation supports a regular contribution to a traditional or Roth IRA. Gross income, employer plans, and profit-sharing plans may affect total contributions, and a tax advisor can help determine whether contribution limits apply for the calendar year.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
