97
Department of the Treasury
Internal Revenue Service
Instructions for Form 5329
Additional Taxes Attributable to Qualified Retirement
Plans (Including IRAs), Annuities, Modified Endowment
Contracts, and MSAs
Section references are to the Internal Revenue Code unless otherwise noted.
General Instructions
Changes To Note
●
Part III was added to reflect the new tax
on excess contributions to Medical
Savings Accounts (MSAs).
●
The tax on excess distributions from
qualified retirement plans (which was
figured in Part IV of the 1996 form) has
been repealed.
●
The following changes were made to
the exceptions listed in the instructions for
line 2:
1. Exceptions 01 through 04 were
rearranged.
2. New exception 07 was added for
distributions to unemployed individuals for
health insurance premiums.
3. Exception 05 (distribution to the
extent you have medical expenses
deductible under section 213) now also
applies to distributions from IRAs.
Purpose of Form
Use Form 5329 to report any additional
income tax or excise tax you may owe in
connection with a qualified retirement plan
(including an individual retirement
arrangement (IRA)), annuity, modified
endowment contract, or MSA.
Do not use Form 5329 to report a
deduction for contributions to an IRA or
MSA. Report an IRA deduction on Form
1040 or 1040A. If you make
nondeductible contributions to your IRA,
use Form 8606, Nondeductible IRAs
(Contributions, Distributions, and Basis),
to report the nondeductible contribution.
Also, if you previously made
nondeductible IRA contributions, use
Form 8606 to figure the taxable part of
your IRA distributions. Report an MSA
deduction on Form 8853, Medical
Savings Accounts and Long-Term Care
Insurance Contracts.
Who Must File
You MUST file Form 5329 if any of the
following apply.
●
You owe a tax on early distributions
from your qualified retirement plan
(including an IRA), annuity, or modified
endowment contract but distribution code
1 is not shown in box 7 of Form 1099-R,
Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc. (complete Part
I).
●
You meet an exception to the tax on
early distributions, but distribution code
2, 3, or 4 is not shown in box 7 of Form
1099-R, or the distribution code shown is
incorrect.
●
You owe a tax because of excess
contributions to your IRA (complete Part
II) or MSA (complete Part III).
●
You owe a tax because you did not
receive a minimum required distribution
from your qualified retirement plan
(complete Part IV).
You DO NOT have to file Form 5329 if:
●
You owe only the 10% tax on early
distributions (distribution code 1 must be
shown in box 7 of Form 1099-R). If you
are filing Form 1040, U.S. Individual
Income Tax Return, do not complete
Form 5329. Enter 10% of the taxable part
of your distribution on Form 1040, line 50.
Write “No” on the dotted line next to line
50 to indicate that you do not have to file
Form 5329.
●
You received an early distribution from
your plan, but meet an exception to the
tax (distribution code 2, 3, or 4 must be
correctly shown on Form 1099-R).
●
You rolled over the taxable part of all
distributions you received during the year.
When and Where To File
Attach your 1997 Form 5329 to your 1997
Form 1040 and file both by the due date
for your Form 1040 (including
extensions).
If you do not have to file Form 1040 but
owe a tax on Form 5329 or otherwise
have to file Form 5329 (see above), you
must still complete and file it with the IRS
at the time and place you would be
required to file Form 1040. If you are filing
your 1997 Form 5329 by itself, be sure to
include your address on page 1 and your
signature and date on page 2. Enclose,
but do not attach, a check or money order
payable to the “Internal Revenue
Service” for the total of any taxes due.
Include your social security number and
“1997 Form 5329” on the check or money
order.
Filing for Previous Tax Years
If you are filing a Form 5329 to pay a tax
for a previous year, you must use that
year's version of the form. For example,
if you are paying tax for 1995, you must
use the 1995 version of the form to report
the tax.
If you owe a tax for that previous year
because of an early distribution, complete
the appropriate part(s) of Form 5329 for
that year and attach it to Form 1040X,
Amended U.S. Individual Income Tax
Return. Be sure to include the distribution
as additional income on Form 1040X if not
previously reported.
If you owe only a tax other than the tax
on early distributions for a previous year,
file Form 5329 by itself for that year. Be
sure to include your signature and date
on page 2. Enclose, but do not attach, a
check or money order payable to the
“Internal Revenue Service” for the amount
of tax due. Include your social security
number, “Form 5329,” and the year for
which the form is being filed on the check
or money order.
Definitions
Qualified Retirement Plan
A qualified retirement plan includes:
●
A qualified pension, profit-sharing, and
stock bonus plan (including a qualified
cash or deferred arrangement (CODA)
under section 401(k)),
●
A qualified annuity plan,
●
A tax-sheltered annuity contract,
●
An individual retirement account, and
●
An individual retirement annuity.
SIMPLE Retirement Plans
A SIMPLE retirement plan is a written
arrangement established under section
408(p) that provides a simplified
tax-favored retirement plan for small
employers. A SIMPLE retirement plan can
be an individual retirement account or an
individual retirement annuity. Therefore,
a SIMPLE retirement plan is a qualified
retirement plan as defined above. As
such, any mention of qualified retirement
plans, individual retirement accounts,
IRAs, or individual retirement annuities in
these instructions includes SIMPLE
retirement plans.
Early Distribution
Generally, any distribution from your
qualified retirement plan, annuity, or
modified endowment contract that you
receive before you reach age 59
1
/2 is an
early distribution. See Part I—Tax on
Cat. No. 13330R
Early Distributions on page 2 for details
on early distributions that are subject to
an additional tax.
Rollover
A rollover is a tax-free distribution
(withdrawal) of assets from one qualified
retirement plan that is reinvested in
another plan. Generally, you must
complete the rollover within 60 days
following the distribution to qualify it for
tax-free treatment. Get Pub. 590,
Individual Retirement Arrangements
(IRAs), for more details and additional
requirements regarding rollovers.
Note:
If you instruct the trustee of your
plan to transfer funds directly to another
plan, the transfer is not considered a
rollover. Do not include the amount
transferred in income or deduct the
amount transferred as a contribution. A
transfer from a qualified employee plan to
an IRA, however, is considered a rollover.
Compensation
Compensation includes wages, salaries,
professional fees, and other pay you
receive for services you perform. It also
includes sales commissions, commissions
on insurance premiums, pay based on a
percentage of profit, tips, and bonuses. It
includes net earnings from
self-employment, but only for a trade or
business in which your personal services
are a material income-producing factor.
For IRAs, treat all taxable alimony
received under a decree of divorce or
separate maintenance as compensation.
Compensation does not include any
amounts received as a pension or annuity
and does not include any amount
received as deferred compensation.
Additional Information
For more details, see Pub. 590. Also get
Pub. 575, Pension and Annuity Income.
Specific Instructions
Joint returns. Each spouse must
complete a separate Form 5329 for taxes
attributable to his or her own qualified
retirement plan, annuity, modified
endowment contract, or MSA. If both
spouses owe penalty taxes and are filing
a joint return, enter the combined total tax
from Forms 5329 on Form 1040, line 50.
Amended return. If you are filing an
amended 1997 Form 5329, check the box
at the top of page 1 of the form. Do not
use this version of Form 5329 to amend
your return for any year other than 1997.
See Filing for Previous Tax Years on
page 1.
Part I—Tax on Early
Distributions
In general, if you receive an early
distribution from a qualified retirement
plan, an annuity, or a modified
endowment contract (including an
involuntary cashout under section
411(a)(11) or 417(e)), the part of the
distribution that is includible in gross
income is subject to an additional 10%
tax.
The tax on early distributions from
qualified retirement plans does not apply
to:
●
1997 IRA contributions withdrawn
during the year or 1996 excess
contributions withdrawn in 1997 before
the filing date (including extensions) of
your 1996 income tax return;
●
Excess IRA contributions for years
before 1996 that were withdrawn in 1997,
and 1996 excess contributions withdrawn
after the due date (including extensions)
of your 1996 income tax return, if no
deduction was allowed for the excess
contributions, and the total IRA
contributions for the tax year for which the
excess contributions were made were not
more than $2,250 (or if the total
contributions for the year included
employer contributions to a SEP, $2,250
increased by the smaller of the amount
of the employer contributions to the SEP
or $30,000) ;
●
The part of your IRA distributions that
represents a return of nondeductible IRA
contributions figured on Form 8606;
●
Distributions rolled over to another
retirement arrangement or plan;
●
Distributions of excess contributions
from a qualified cash or deferred
arrangement;
●
Distributions of excess aggregate
contributions to meet nondiscrimination
requirements for employer matching and
employee contributions;
●
Distributions of excess deferrals; and
●
Amounts distributed from unfunded
deferred compensation plans of
tax-exempt or state and local government
employers.
See the instructions for Line 2 below
for other distributions that are not subject
to the tax.
Line 1
Enter the taxable amount of early
distributions made to you from (a) a
qualified pension plan, including your IRA
(and income earned on excess
contributions to your IRA), (b) an annuity
contract, or (c) a modified endowment
contract (as defined in section 7702A)
entered into after June 20, 1988. The
taxable amount of a distribution is the
amount you include in gross income.
Prohibited transactions. If you engaged
in a prohibited transaction, such as
borrowing from your individual retirement
account or annuity, or pledging your
individual retirement annuity as security
for a loan, your account or annuity no
longer qualified as an IRA on the first day
of the tax year in which you did the
borrowing or pledging. You are
considered to have received a distribution
of the entire value of your account or
annuity at that time. Using your IRA as a
basis for obtaining a benefit is also a
prohibited transaction. If you were under
age 59
1
/ 2 on the first day of the year,
report the entire value of the account or
annuity on line 1.
Pledging individual retirement
account. If you pledged any part of your
individual retirement account as security
for a loan, that part is considered
distributed to you at the time pledged. If
you were under age 59
1
/2 at the time of the
pledge, enter the amount pledged on line
1.
Collectibles. If your IRA trustee invested
your funds in collectibles, you are
considered to have received a distribution
equal to the cost of any “collectible.”
Collectibles include works of art, rugs,
antiques, metals, gems, stamps, coins,
alcoholic beverages, and certain other
tangible personal property.
If you were under age 59
1
/2 when the
funds were invested, include the cost of
the collectible on line 1. Also, include the
total cost of the collectible as income on
your 1997 Form 1040, line 15b.
Exception.
Your IRA trustee may
invest your IRA funds in U.S. one,
one-half, one-quarter, and one-tenth
ounce gold coins, and one ounce silver
coins, minted after September 30, 1986.
Note:
You must include the taxable
amount of all distributions (including
income earned on investments) from line
1, on either line 15b or 16b, Form 1040,
whichever applies.
Line 2
The 10% additional tax does not apply to
certain distributions specifically excepted
by the Code. Enter on line 2 the amount
that can be excluded. In the space
provided, enter the applicable exception
number (01-08) from the chart on the next
page.
Page 2
Note:
Exceptions 01 and 06 above DO
NOT apply to distributions from IRAs or
annuity or modified endowment contracts.
They apply only to distributions from
qualified employee plans. Exceptions 05
and 07 do not apply to annuity or modified
endowment contracts.
Other exceptions. In addition to the
exceptions listed above, the tax does not
apply to the following:
●
Any distributions from a plan
maintained by an employer if:
1. You separated from service by
March 1, 1986;
2. As of March 1, 1986, your entire
interest was in pay status under a written
election that provides a specific schedule
for distribution of your entire interest; and
3. The distribution is actually being
made under the written election.
●
Distributions that are dividends paid
with respect to stock described in section
404(k).
●
Distributions from annuity contracts to
the extent that the distributions are
allocable to investment in the contract
before August 14, 1982.
For additional exceptions applicable to
annuities, see Pub. 575.
If any of these exceptions applies,
include the amount that can be excluded
on line 2. Enter Exception No. 08 in the
space provided.
Also, if you received a Form 1099-R for
a distribution that incorrectly indicated an
early distribution (code 1 was entered in
box 7 of the Form 1099-R), include on line
2 the amount of the distribution that you
received when you were age 59
1
/2 or
Worksheet for line 7 (keep for your records)
1 Enter the smaller of:
1.
2 Enter amount actually contributed to your account
2.
3 Contribution credit.—Subtract line 2 from line 1 (but do not enter less
than zero). Enter this amount on line 7 of Form 5329. You should also add
to the amount calculated on line 10a or 10b (whichever applies to you) of
the IRA Worksheet in the Form 1040 instructions the smaller of either: (a)
this amount; or (b) your earlier years’ excess contributions not previously
eliminated
3.
● $2,000; or
● Your wages and other earned income (combined for you and your
spouse, if married filing jointly) from Form 1040, minus any deductions on
Form 1040, lines 26 and 28. If married filing jointly, reduce this amount by
your spouse’s allowed IRA contribution. Do not reduce wages by any loss
from self-employment
No. Exception
01 Distribution due to separation from
service in or after the year of
reaching age 55
02 Distribution made as part of a
series of substantially equal
periodic payments (made at least
annually) for your life (or life
expectancy) or the joint lives (or
joint life expectancies) of you and
your designated beneficiary (if
from a qualified employee plan,
payments must begin after
separation from service)
03 Distribution due to total and
permanent disability
older. Enter Exception No. 08 in the space
provided.
Line 4
Multiply line 3 by 10%. However, if any
amount on line 3 was a distribution from
a SIMPLE retirement plan (see definition
on page 1), you must multiply that amount
by 25% instead of 10%. SIMPLE
distributions are included in boxes 1 and
2a of Form 1099–R and are designated
with a code “S” in box 7.
Part II—Tax on Excess
Contributions to Individual
Retirement Arrangements
If you contributed, either this year or in
earlier years, more to your IRA than is or
was allowable, you may have to pay a tax
on excess contributions. For 1997, your
allowable contribution is generally the
smaller of your taxable compensation or
$2,000. If you are married filing a joint
return and your taxable compensation is
less than your spouse's taxable
compensation, your allowable contribution
is based on the combined taxable
compensation of you and your spouse
minus your spouse's allowed contribution
to his or her IRA, limited to $2,000. The
limit does not apply to SIMPLE retirement
plans. For details, see Pub. 590.
However, you can withdraw some or
all of your excess contributions for 1997
and they will not be taxed as a distribution
if:
●
You make the withdrawal by the due
date (including extensions) of your 1997
income tax return,
●
You do not claim a deduction for the
amount of the contribution withdrawn, and
●
You also withdraw from your IRA any
income earned on the withdrawn
contributions.
Do not include the withdrawn
contributions as excess contributions on
line 5.
You must include the income earned
on the contributions withdrawn by the due
date of your income tax return on Form
1040 for the year in which you made the
contribution. Also, if you had not reached
age 59
1
/ 2 at the time you received the
distribution, report the income (but not the
withdrawn contributions) as an early
withdrawal in Part I, line 1.
Line 5
Enter the excess contributions you made
for 1997. To figure this amount, subtract
your contributions limit from your actual
contributions. Your contributions limit is
the smaller of:
●
$2,000; or
●
Your wages and other earned income
(combined for you and your spouse, if
married filing jointly) from Form 1040,
minus any deductions on Form 1040,
lines 26 and 28. If married filing jointly,
reduce this amount by your spouse's
allowed IRA contribution. Do not reduce
wages by any loss from self-employment.
Do not include any rollover
contributions in figuring your excess
contributions.
Line 6
Enter the total amount of 1996 excess
contributions not withdrawn from your IRA
by the due date of your 1996 income tax
return, plus the 1995 and earlier excess
contributions not withdrawn or otherwise
eliminated before January 1, 1997.
This entry should be the same as the
amount from line 12 of your 1996 Form
5329.
Line 7
If you contributed less to your IRA for
1997 than your contributions limit, and
your excess contributions from earlier
years have not been eliminated, complete
the worksheet above to see if you have a
contribution credit. Do not enter an
amount on line 7 if you have an amount
on line 5.
Line 8
If you withdrew any money from your IRA
in 1997 that must be included in your
income for 1997, enter that amount on
line 8. Do not include any contributions
withdrawn that will be reported on line 9.
Line 9
Enter any excess contributions to your
IRA for 1976 through 1995 that you
withdrew in 1997, and any 1996 excess
contributions that you withdrew after the
04 Distribution due to death (does not
apply to modified endowment
contracts)
05 Distribution to the extent you have
medical expenses deductible
under section 213
06 Distributions made to an alternate
payee under a qualified domestic
relations order
07 Distributions made to unemployed
individuals for health insurance
premiums
08 Other (see instructions below)
Page 3
due date (including any extensions) for
your 1996 income tax return, if:
●
You did not claim a deduction for the
excess, and
●
The total contributions to your IRA for
the tax year for which the excess
contributions were made were not more
than $2,250 (or if the total contributions
for the year included employer
contributions to a SEP, $2,250 increased
by the smaller of the amount of the
employer contributions to the SEP or
$30,000).
Part III—Tax on Excess
Contributions to Medical
Savings Accounts
If you or your employer contributed more
to your MSA than is allowable, you may
have to pay a tax on excess contributions.
However, you can withdraw some or all
of your excess contributions for 1997 and
they will not be taxed as a distribution if:
●
You make the withdrawal by the due
date (including extensions) of your 1997
income tax return,
●
You do not claim a deduction for the
amount of the contribution withdrawn, and
●
You also withdraw from your MSA any
income earned on the withdrawn
contributions.
Do not include the withdrawn
contributions as excess contributions on
line 14.
You must include the income earned
on the contributions withdrawn by the due
date of your income tax return on Form
1040 for the year in which you made the
contribution. Also, report the withdrawn
contributions (and the earnings on them)
as MSA distributions on lines 8a and 8b
of Form 8853.
Line 14
Enter the excess contributions you made
in 1997. To figure this amount, subtract
your contributions limit (line 7 of Form
8853) from your actual contributions (line
4 of Form 8853).
You may also have an amount that
must be entered on line 14 as a result of
excess employer contributions to your
MSA. For details, see the instructions for
Form 8853.
Do not include any rollover
contributions in figuring your excess
contributions.
Part IV—Tax on Excess
Accumulation in Qualified
Retirement Plans (Including
IRAs)
If you do not receive the minimum
required distribution from your qualified
retirement plan, you have an excess
accumulation subject to an additional tax.
For purposes of the tax on excess
accumulations, a qualified retirement plan
also includes an eligible deferred
compensation plan under section 457.
The additional tax is equal to 50% of
the difference between the amount that
was required to be distributed and the
amount that was actually distributed.
Required Distributions
IRA. You must start receiving
distributions from your IRA by April 1 of
the year following the year in which you
reach age 70
1
/2. At that time, you may
receive your entire interest in the IRA, or
begin receiving periodic distributions over
your life expectancy or over the joint life
expectancy of you and your designated
beneficiary (or over a shorter period).
If you choose to receive periodic
distributions, you must receive a minimum
required distribution each year. For each
year after the year in which you reach age
70
1
/ 2, you must receive the minimum
required distribution by December 31 of
that year.
Figure the minimum required
distribution by dividing the account
balance of the IRA on December 31 of the
year preceding the distribution by the
applicable life expectancy.
For applicable life expectancies, you
must use the expected return multiples
from the tables in Pub. 590 or Pub. 939,
General Rule for Pensions and Annuities.
Under an alternative method, if you
have more than one IRA, you may take
the minimum distribution from any one or
more of the individual IRAs.
For more details on the minimum
distribution rules (including examples) and
the life expectancy tables, see Pub. 590.
Qualified pension, profit-sharing, stock
bonus, or section 457 deferred
compensation plan. In general, you
must begin receiving distributions from
your plan no later than April 1 following
the later of (1) the year in which you
reached age 70
1
/2, or (2) the year in which
you retired.
Your plan administrator figures the
amount that must be distributed each
year. Unless you are covered by a
governmental or church plan, if you retire
in a calendar year after the year in which
you reach age 70
1
/2, the amount to be
distributed must be actuarially increased
to take into account the period after age
70
1
/ 2 in which you were not receiving any
benefits under the plan.
Exception.
If you were a 5% owner
of the employer maintaining the plan, you
must begin receiving distributions no later
than April 1 of the year following the year
in which you reached age 70
1
/2, regardless
of when you retire.
Note:
The IRS may waive this tax on
excess accumulations if you can show
that any shortfall in the amount of
withdrawals from your qualified retirement
plan was due to reasonable error, and
that you are taking appropriate steps to
remedy the shortfall. If you believe you
qualify for this relief, file Form 5329, pay
this excise tax, and attach your letter of
explanation. If the IRS grants your
request, we will send you a refund.
Paperwork Reduction Act Notice. We
ask for the information on this form to
carry out the Internal Revenue laws of the
United States. You are required to give
us the information. We need it to ensure
that you are complying with these laws
and to allow us to figure and collect the
right amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section 6103.
The time needed to complete and file
this form will vary depending on individual
circumstances. The estimated average
time is:
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. You
can write to the Tax Forms Committee,
Western Area Distribution Center, Rancho
Cordova, CA 95743-0001. DO NOT send
the form to this address. Instead, see
When and Where To File on page 1.
Recordkeeping .................. 40 min.
Learning about the law
or the form ........................ 22 min.
Preparing the form ........... 35 min.
Copying, assembling,
and sending the form to
the IRS ............................... 35 min.
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