(Including IRAs) and Other TaxFavored Accounts - irs 2025

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Use Form 5329 to report additional taxes on IRAs, other qualified retirement plans, modified endowment contracts, Coverdell ESAs, QTPs, Archer MSAs, or HSAs.
Who Must File Form 5329? You must complete and submit Form 5329 to the IRS with your tax return if you: Received any early distributions from a qualifying tax-favored retirement account such as a 401(k) or individual retirement account (IRA).
Tax-favored health programs are designed to give people tax advantages to offset their health care costs. These programs use an account created solely for qualified medical expenses like doctor visits, labs, drugs, and more, depending on the program.
When you start withdrawing from your account at retirement age, you will pay taxes on the funds you take out. With a Roth IRA, you contribute to your IRA after youve paid taxes for the year; and when you make withdrawals at retirement age, you dont pay any taxes on the funds you take out.
If you only owe the additional 10% tax on the full amount of the early distributions, you may be able to report this tax directly on Schedule 2 (Form 1040), line 8, without filing Form 5329. See instructions.
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You may be able to get the penalty waived if you missed taking your RMD due to an illness, mental incapacity, or bank error. Youll calculate that penalty in Part 9 of Form 5329. To request a waiver, enter RC (for reasonable cause) and the amount of shortfall you want waived on the dotted line next to Line 54.
Form 5329 Waiver Example The IRS can waive this penalty on an individual basis, only if the shortfall was due to reasonable error and reasonable steps are being taken to correct the shortfall. Reasonable causes for missing the RMD include serious illness, mental incapacity, or an error made by the bank.
Some common scenarios that may require the filing of Form 5329 include: Early withdrawals. If an individual takes money out of a qualified retirement plan or IRA before docHubing the age of 59, they may be subject to early withdrawal penalties. Form 5329 is used to calculate and report these penalties.

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