Form 5329 Exception Codes 14 to 18: Rare Exceptions

Updated October 17, 2026. Quick answer: Codes 14 to 18 on Form 5329 line 2 cover uncommon situations: a pre-1986 payout election, section 404(k) dividends, annuity money invested before August 14, 1982, federal phased retirement annuity payments, and section 414(w) withdrawals. Most filers will never use them. If one fits, you enter the amount you can exclude on line 2 and that code in the space provided.

Why these five codes are different

The other numbers on the list cover common events such as leaving a job at a certain age or a disability. These five cover narrow situations, several of them tied to a date long past. The reasons that can avoid the tax are collected on the early withdrawal penalty exceptions page, and the form is mapped in Form 5329 explained. The commoner ones have their own pages, such as exception code 01 and exception code 02.

Code 14: a payout election in place by March 1, 1986

The instructions open code 14 with “Distributions from a plan maintained by an employer if:” and then give three conditions. The first is “You separated from service by March 1, 1986;” The second is “As of March 1, 1986, your entire interest was in pay status under a written election that provides a specific schedule for the distribution of your entire interest; and” The third is “The distribution is actually being made under the written election.”

Publication 575 states the same exception for qualified plans: “From an employer plan under a written election that provides a specific schedule for distribution of your entire interest if, as of March 1, 1986, you had separated from service and had begun receiving payments under the election;”

Code 15: section 404(k) dividends

Code 15 is a single sentence: “Distributions that are dividends paid with respect to stock described in section 404(k).” Publication 575 describes the same exception as “From an employee stock ownership plan for dividends on employer securities held by the plan;”.

Code 16: annuity investment before August 14, 1982

Code 16 reads “Distributions from annuity contracts to the extent that the distributions are allocable to the investment in the contract before August 14, 1982.” The instructions continue “For additional exceptions that apply to annuities, see Tax on Early Distributions under Special Additional Taxes in Pub. 575.” Publication 575 lists the matching exception for nonqualified annuities: “From a deferred annuity contract to the extent allocable to investment in the contract before August 14, 1982;”

The same publication explains how the date splits a contract that has money from both sides of it: “If you bought an annuity contract before August 14, 1982, and made investments both before and after August 14, 1982, the distributed amounts are allocated to your investment or to earnings in the following order.” It lists “The part of your investment that was made before August 14, 1982.” first. A related special rate appears in the same place: “A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as of March 1, 1986, you had begun receiving payments under the election.” The publication then says “On line 4 of Form 5329, multiply the line 3 amount by 5% instead of 10%.” and “Attach an explanation to your return.”

Code 17: phased retirement annuity payments

Code 17 reads “Distributions that are phased retirement annuity payments made to federal employees.” It adds “See Pub. 721 for more information on the phased retirement program.” Publication 575 lists it among the qualified plan exceptions: “Phased retirement annuity payments made to federal employees”. The federal annuity rules sit in Publication 721, which is outside this page.

Code 18: section 414(w) withdrawals

Code 18 is also one sentence: “Permissible withdrawals under section 414(w) from eligible automatic contribution arrangements.” The sentence above is the instructions’ whole entry for it, so check with your plan administrator or the Form 1099-R for how the payer coded the payment.

How to claim any of them on Form 5329

The instructions say “In general, you must file Form 5329 to report an exception to the 10% additional tax on an early distribution from a qualified retirement plan, including an IRA.” On line 2 you “Enter on line 2 the amount that you can exclude.” and “In the space provided, enter the applicable exception number”. If a payment fits more than one exception, exception code 99 explains what to enter. Publication 575 adds “You should complete Form 5329 if you meet an exception to the tax on early distributions but box 7 of your Form 1099-R doesn’t indicate an exception.” See the 1099-R box 7 codes page.

Where it goes next

Line 2 feeds line 3. The form’s caption for line 3 reads “Amount subject to additional tax. Subtract line 2 from line 1”. Line 3 then feeds line 4, whose caption reads “Additional tax. Enter 10% (0.10) of line 3. Include this amount on Schedule 2 (Form 1040), line 8”. For couples the instructions add “If both you and your spouse are required to file Form 5329, complete a separate form for each of you.” The Part I lines are walked through on the Part I lines 1 to 4 page, and the Schedule 2 line is covered on the Schedule 2 page.

Edition and line numbers

This page reads the 2025 Form 5329 and its 2025 instructions, and where a Publication is cited, the 2025-returns edition of that Publication. These are the current files irs.gov served on 2026-10-17, and they are the forms for the tax year 2025 return, filed in 2026. The wording of codes 14 to 18 is as quoted above. 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 them differently.

Common mistakes

• Using code 14 without the election. The instructions require that “As of March 1, 1986, your entire interest was in pay status under a written election”
• Treating all annuity money as covered by code 16. The code applies only “to the extent that the distributions are allocable to the investment in the contract before August 14, 1982.”
• Skipping the explanation on a 5% line 4 entry. Publication 575 says “Attach an explanation to your return.”

Related: Form 5329 explained, Early withdrawal penalty exceptions, The 10 percent penalty on an annuity withdrawal before 59, and 1099-R box 7 codes.

Sources

• Instructions for Form 5329 (2025): https://www.irs.gov/pub/irs-pdf/i5329.pdf
• Form 5329 (2025): https://www.irs.gov/pub/irs-pdf/f5329.pdf
• Publication 575, Pension and Annuity Income (for 2025 returns): https://www.irs.gov/pub/irs-pdf/p575.pdf

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.