What Form 5329 (2013) Is For
IRS Form 5329 (2013) is the tax form used to report additional taxes on retirement plans and other tax-favored accounts when specific requirements are not met. It applies to traditional IRAs, Roth IRAs, qualified retirement plans, and 401(k) accounts when early distributions, excess contributions, or missed required minimum distributions occur. The form ensures that withdrawals, distributions, and contribution limits are tracked adequately for each retirement account.
Taxpayers use this form to calculate penalties for early distributions made before the required age or when excess contributions remain in an account after the deadline has passed. It also applies when the account owner fails to take the minimum amount required based on a life expectancy factor. The information reported helps the IRS verify the accuracy of taxes on retirement savings and related assets.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts (2013).
When You’d Use Form 5329
A taxpayer must file Form 5329 when distributions, contributions, or withdrawals from an IRA or retirement plan do not satisfy IRS rules. This includes Roth IRA contributions made over income limits, traditional IRA contributions above allowable amounts, and missed required minimum distribution obligations. It also applies to situations involving disability, death, or exceptions that must be appropriately documented.
Form 5329 is filed with the annual return or separately when no complete tax form is required. A financial institution may report distributions on Form 1099-R, but the taxpayer must still report additional taxes when penalties apply. If an error is discovered later, the taxpayer may file an amended form to correct account balances or shortfall calculations.
Key Rules or Details for 2013
For 2013, contribution limits determined the maximum amount that taxpayers could contribute to traditional IRAs and Roth IRAs, while certain income levels determined eligibility for Roth IRA contributions. Early distributions before age 59½ were subject to a 10 percent penalty unless the taxpayer qualified for a specific exception. Required minimum distributions began once the account owner reached the beginning age and were calculated using a life expectancy factor.
Excess contributions triggered a 6 percent tax each year until removed by the IRA custodian. The penalty is applied to the lesser of the excess or the year-end account balance. Required minimum distribution penalties equaled 50 percent of the unpaid portion; however, the taxpayer could request relief by demonstrating reasonable cause for the mistake.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Individual Credit & Deduction Forms.
Step-by-Step (High Level)
Follow these general steps when completing Form 5329 (2013):
- Review all retirement account documents from the financial institution, including Forms 1099-R, to confirm distribution details
- Determine whether early distributions were taken and identify any exceptions that may apply.
- Calculate excess contributions for traditional IRAs, Roth IRAs, HSAs, Archer MSAs, or Coverdell ESAs.
- Review the required minimum distributions and compare them to actual withdrawals to determine if a shortfall occurred.
- Complete the appropriate sections of Form 5329 that apply to early distributions, excess contributions, or required minimum distribution penalties.
- Transfer calculated penalties to the appropriate lines of Form 1040
- File the form with a full return or file Form 5329 independently when no full tax return is required.
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
- Assuming hardship automatically qualifies for a penalty exception: Exceptions apply only when all IRS requirements are met; for example, medical expenses must exceed a specific percentage of adjusted gross income.
- Miscalculating excess contributions: Excess IRA contributions continue to be taxed annually until removed, so the taxpayer must coordinate with the custodian to withdraw both the excess and its earnings.
- Failing to take a required minimum distribution: Taxpayers must calculate the RMD using the proper life expectancy factor and file Form 5329 (2013) with a reasonable-cause explanation if they miss any portion of the distribution.
- Ignoring Roth IRA income limits: Roth IRA contributions are restricted by income thresholds, and exceeding those limits results in excess donations that must be corrected to avoid ongoing penalties.
What Happens After You File
After Form 5329 is filed, the IRS reviews the calculations and determines whether additional taxes, fees, or penalties were correctly reported. If the taxpayer has already paid the penalty owed, the IRS records the information with the tax return and updates the account. When a penalty waiver is requested, the IRS evaluates whether the explanation and corrective action satisfy reasonable cause requirements.
The taxpayer should expect a follow-up if the balances, withdrawals, or distributions reported by a financial institution differ from those listed on the form. In some cases, the IRS may adjust the penalty or request supporting documents related to the account. Taxpayers should keep records for future reference, including notes, calculations, and statements related to their retirement accounts.
FAQs
What is IRS Form 5329 (2013) used for?
IRS Form 5329 (2013) is used to report additional taxes related to early distributions, excess contributions, or missed required minimum distributions from retirement plans or tax-favored accounts. It helps the IRS verify whether the account owner met all rules for withdrawals, contributions, and minimum amounts.
Do Roth IRA contributions affect whether someone must file this tax form?
A Roth IRA contribution may require filing the tax form when income exceeds contribution limits or excess contributions remain in the account. The form helps report additional taxes associated with Roth IRAs, retirement savings, and distributions that do not meet IRS requirements.
How do required minimum distributions relate to this form?
A required minimum distribution must be taken once the account owner reaches the appropriate age. Failing to withdraw the minimum amount may result in penalties, as stated on the form. The penalty is calculated using a life expectancy factor and based on the shortfall in coverage.
When do excess contributions need to be reported?
Excess contributions to a traditional IRA, Roth IRA, or other individual retirement account are reported when the taxpayer makes contributions that exceed the allowed limits. These amounts may be subject to additional taxes until corrected with the assistance of an IRA custodian or financial institution.
Does a 401(k) withdrawal require filing this form?
A 401(k) withdrawal may require filing the form when early distributions occur or when exceptions are not met. The taxpayer must determine whether the distribution is taxable, whether penalties apply, and whether the rules for qualified retirement plans have been met.
