Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Other Taxes

Qualified Retirement Plans

Additional Taxes Due

Traditional IRAs and other qualified plans allow individuals to defer paying taxes on money they contribute, and on the earnings, until the funds are distributed.

If the rules for contributions and distributions are not followed, additional taxes may be due as a penalty. For example, the taxpayer must pay income tax plus an additional tax if any of the following apply:

  • A distribution is taken before the individual reaches the age of 59½ and it is not rolled over into another qualified plan or IRA, and no other exception applies (in scope)
  • Minimum distributions are not withdrawn when required (out of scope)
  • Excess contributions are not removed by the due date of the return, including extensions (out of scope)

Refer to the intake and interview sheet, Part III — Income, for the question regarding pension or IRA distributions. If the answer is "yes," ask the taxpayer for any Form(s) 1099-R that report these payments to determine if the taxpayer is subject to the additional tax or qualifies for an exception.

Tip

If the taxpayer is under the age of 59½, earnings on excess contributions withdrawn by the due date of the return are early distributions and subject to the 10% additional tax. Refer to the Adjustments to Income lesson for more information.

Tip

Form 5329, Part I provides for the exceptions to the additional tax on part or all of the early distributions from IRAs or qualified pension plans; only Part I of Form 5329 is in scope. The other parts of Form 5329 are out of scope and are referenced only for awareness. Refer taxpayers with these issues to a professional tax preparer.

Intake and Interview Sheet, showing question about pension, annuities, and/or IRA distributions.