Skip to content
Independent money guidance
Clear Money Guide
Start here
Menu

Form 5329 Exception Codes 03 and 04: Disability and Death

Updated October 17, 2026. Quick answer: Code 03 on Form 5329 is for distributions due to total and permanent disability, and code 04 is for distributions due to death. You enter the excluded amount on line 2 with the code beside it. The instructions say what counts as disability, and code 04 does not apply to modified endowment contracts.

What the two codes say

The instructions list them in two short entries: “Distributions due to total and permanent disability.” for code 03, and “Distributions due to death (doesn’t apply to modified endowment contracts).” for code 04. Publication 575 lists both among the general exceptions: “Made because you are totally and permanently disabled” and “Made on or after the death of the plan participant or contract holder.”

Code 03: what counts as disabled

The instructions give a definition: “You are considered disabled if you can furnish proof that you can’t do any substantial gainful activity because of your physical or mental condition.” They add a medical requirement: “A medical determination that your condition can be expected to result in death or to be of long, continued, and indefinite duration must be made.”

Publication 590-B states the IRA version: “If you become disabled before you reach age 59 1/2, any distributions from your traditional IRA because of your disability aren’t subject to the 10% additional tax.” It repeats the proof test, “A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.”

Code 04: distributions due to death

For an IRA, Publication 590-B explains the beneficiary side: “If you die before reaching age 59 1/2, the assets in your traditional IRA can be distributed to your beneficiary or to your estate without either having to pay the 10% additional tax.” There is a limit for spouses who treat the inherited IRA as their own: “However, if you inherit a traditional IRA from your deceased spouse and elect to treat it as your own (as discussed under What if You Inherit an IRA, earlier), any distribution you later receive before you reach age 59 1/2 may be subject to the 10% additional tax.” The general rules for inherited accounts are on the IRAs, RMDs and beneficiaries guide.

How to claim it on Form 5329

Both codes are entered on line 2 of Part I. The instructions say “Enter on line 2 the amount that you can exclude.” “In the space provided, enter the applicable exception number”. Publication 575 explains when the form is needed: “If the payer knows that an exception applies to your early distribution, distribution code” 2, 3 or 4 “should be shown in box 7 of your Form 1099-R” and the form need not be filed; “you must file Form 5329.” when box 7 does not reflect the exception. The box 7 codes are covered on the 1099-R box 7 codes page. If another exception also applies, “If more than one exception applies, enter 99.” See Form 5329 exception code 99.

Where it goes next

Line 2 reduces line 1 on the way to line 3: “Amount subject to additional tax. Subtract line 2 from line 1”. Line 4 is “Additional tax. Enter 10% (0.10) of line 3.” and it goes to “Schedule 2 (Form 1040), line 8”. See Form 5329 lines 1 to 4 for the lines in order and Form 5329 explained for the whole form.

Edition and line numbers

This page reads the 2025 Form 5329 and its 2025 instructions, along with the 2025-returns editions of the two Publications it cites, the current files irs.gov served on 2026-10-17. They are the forms for the tax year 2025 return, filed in 2026. Check the tax year printed on the form you are filling in and use the line numbers and exception numbers on that year’s form, because a different year’s form can number or word its lines and exceptions differently.

Common mistakes

  • Claiming code 03 without the medical determination. The instructions say “A medical determination that your condition can be expected to result in death or to be of long, continued, and indefinite duration must be made.”
  • Using code 04 for a modified endowment contract. The instructions say “(doesn’t apply to modified endowment contracts)” beside the death code.
  • Skipping Form 5329 when box 7 is wrong. Publication 575 says “you must file Form 5329.” when the exception applies but the code on the 1099-R does not show it.

Related: 1099-R box 7 codes, 1099-R code 3, 1099-R code 4, and IRAs, RMDs and beneficiaries guide.

Sources

Read from the IRS documents linked above on October 17, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.

Next step