What Is the Purpose of Federal Tax Form 5329?

The purpose of the federal tax Form 5329 is to indicate whether an individual with a retirement plan or ESA owes the IRS the 10 percent early-distribution or other penalties, according to Investopedia. Form 5329 is entitled, "Additional Taxes on Qualified Retirement Plans (including IRAs) and Tax-favored Accounts."

Transactions that require filling of Form 5329 include early distributions, excess contribution and excess accumulation, according to Investopedia. With early-distribution, an individual receives retirement distribution before the age of 59.5 attracting an early-distribution penalty of 10 percent. The excess contribution is subject to six percent penalty if not withdrawn before the deadline while excess accumulation attracts a 50 percent penalty of the amount needed to meet the required minimum distribution.