by Denise Appleby CISP, CRC, CRPS, CRSP, APA
When you file your tax return this year, you may need to include information from certain tax forms that you receive from your IRA custodian or trustee of your qualified plan account. Additionally, and you may need to file other forms, some of which determines the tax-treatment of distributions and IRS excise taxes. The following article highlights four of these forms.
Form # 1: IRS Form 1099-R: Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
IRS Form 1099-R is issued by your IRA Custodian/Trustee or plan administrator when certain transactions occur within your retirement account during the year. These include:
- Distributions made from your retirement accounts during the year, even if the amounts were later rolled over. These include distributions from accounts under qualified plans, 403(b) plans and governmental 457(b) plans, Traditional IRAs, Roth IRAs, SEP IRAs and SIMPLE IRAs; and
- Recharacterizations of IRA contributions or Roth conversion amounts. For recharacterizations, the 1099-R would be issued for the IRA from which the recharacterization occurred.
Form 1099-R is required to be issued by January 31 of the year that follows the year in which the distribution or recharacterization occurred. Therefore, your 1099-R should be issued by January 31 of this year, for distributions that occurred last year. If January 31 falls on a weekend or legal holiday, the deadline is extended to the next business day.
TIP: A common misconception is that if you roll over a distribution which you receive during the year, it should not be reported on a 1099-R. However, that is not the case. If you rollover over a distribution to an IRA, your IRA Custodian/Trustee will issue IRS Form 5498, showing the amount that was rolled over. The 5498 will offset the 1099-R.
What You Should Do With Form 1099-R
Provide a copy of your 1099-R to your tax preparer, so that he (or she) can include any required information on your tax return. Form 1099-R is not required to be filed with your tax return, unless it shows that taxes were withheld from distributions you received during the year.
For more on Form 1099-R, see the article
Form # 2: Form 5329: Additional Taxes On Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
Form 5329 is used to address penalties on certain transactions which occur in your retirement account. These include:
- The 10% early distribution penalty. If your IRA Custodian/Trustee or plan administrator incorrectly indicates whether the distribution amount is subject to the 10% early distribution penalty, you must file Form 5329 for this purpose to correct the reporting.
- Excess accumulation penalty. You owe the IRS a 50% excess accumulation penalty on any required minimum distribution (RMD) amounts not withdrawn by the deadline. Form 5329 must be filed even if you are asking to have the penalty waived. And
- The 6% additional tax assessed on excess contributions to IRAs. If you make an excess contribution to an IRA, and you fail to correct the excess contribution by your tax filing deadline, including extensions, you must for Form 5329 to report the penalty.
Form 5329 should be filed with your tax return. However, if your tax return has already been filed, it can be filed separately.
Form # 3: Form 8606: Nondeductible IRAs
Form 8606 is used to keep track of basis in your IRA. Basis is attributed to nondeductible IRA contributions to traditional IRAs and rollover of after-tax amounts.
Form 8606 must be filed for any year that you make nondeductible contributions to your IRA. Form 8606 should also be filed for any year that you have basis in your IRA, and a distribution or Roth conversion occurs from any of your traditional IRA, SEP IRA or SIMPLE IRA.
Failure to file Form 8606 could result in you owing income tax on amounts which should be tax-free.
Form 8606 should be filed with your tax return. However, if your tax return has already been filed, it can be filed separately.
Form # 4: Form 5498: IRA Contribution Information
IRS Form 5498, issued by IRA Custodians/Trustees is used to report contributions made to your IRA and recharacterizations between traditional IRAs and Roth IRAs. This includes IRA Contributions, rollover contributions, Roth conversion contributions and recharacterized IRA contributions. Form 5498 is also used to report the year-end fair market value for your IRA, and to indicate whether you are subject to RMDs from your traditional IRAs, SEP IRAs or SIMPLE IRAs for the year in which it is issued.
Form 5498 is required to be issued by May 31 of the year that follows the year in which a contribution is made to your IRA. Therefore, your Form 5498 should be issued by May 31 of this year, for contributions that occurred last year. If May 31 falls on a weekend or legal holiday, the deadline is extended to the next business day.
What You Should Do With Form 5498
Form 5498 is not required to be filed with your tax return. Instead, retain it along with the rest of your tax documentation. It is a good idea to provide a copy to your tax preparer, just in case the information reported on the form should be included on your tax return.
Form 5498 is not issued for qualified plans, 403(b) plans and governmental 457(b) plans. Therefore, if you made a rollover contribution to an account under either of these plans, be sure to inform your tax preparer.
Tell Your Tax Preparer
There are two primary reasons why you should inform your tax preparer about these forms. He (or she) may be overwhelmed with a high volume of tax returns, and may overlook the details, or he may be unaware of these special filing requirements for your retirement accounts. Ensuring that the information is correctly reflected on your tax return can help you to avoid penalties and prevent the taxation of amounts that should be tax-free.