What to do with Form 1099R
Dana Anspach, CFP, RMA from Sensible Money discusses tax tips related to IRS Form 1099R.
Key Takeaways
- Don't report the full 1099R amount as taxable income; only the taxable portion belongs on your tax return—use lines 4A and 4B on Form 1040 to distinguish between total and taxable distributions
- If you took an RMD early in 2020 but put it back by August 31st, save your IRA statement as proof since Form 5498 won't arrive until May, and report $0 as taxable on your 1099R
- Track non-deductible IRA contributions using Form 8606 to avoid double-taxation on withdrawals and Roth conversions; missing records can result in paying taxes twice on over $200,000+
- Qualified charitable distributions (QCDs) from IRAs bypass adjusted gross income but appear as full distributions on 1099R—you must manually track and report only the non-charitable portion as taxable
- Even when using a tax professional, you must communicate which portions of your 1099R are rollovers, QCDs, putbacks, or coronavirus-related distributions, as the custodian reports the full gross amount
What to do with Form 1099R: Dana Anspach, CFP, RMA from Sensible Money discusses tax tips related to IRS Form 1099R.
Form 1099-R is a tax form used to report distributions from pensions, annuities, retirement plans, Individual Retirement Accounts (IRAs), and other similar retirement accounts. The form is issued by the financial institution or plan administrator that made the distribution and is provided to both the recipient of the distribution (the taxpayer) and the Internal Revenue Service (IRS).
Here are some key points about Form 1099-R:
- Purpose: The primary purpose of Form 1099-R is to report distributions made from retirement accounts to the IRS and the taxpayer. This includes distributions due to retirement, death, disability, or other events that trigger the distribution of funds from a retirement account.
- Information Reported: Form 1099-R provides various information about the distribution, including:
- The total amount of the distribution.
- The taxable amount of the distribution (if any).
- The type of distribution (e.g., normal distribution, early distribution, rollover, etc.).
- The taxpayer's contributions to the account (if applicable).
- Any federal income tax withheld from the distribution.
- Tax Treatment: The taxpayer must report the information from Form 1099-R on their federal income tax return. The taxable portion of the distribution is generally subject to income tax in the year it is received, unless it qualifies for an exception or exclusion (e.g., qualified Roth IRA distributions). Early distributions may also be subject to an additional 10% penalty tax unless an exception applies (e.g., for certain qualified medical expenses or first-time home purchases).
- Filing Deadline: Form 1099-R must be provided to the recipient (the taxpayer) by January 31st of the year following the calendar year in which the distribution was made. The form must also be filed with the IRS by the end of February if filed on paper, or by the end of March if filed electronically.
- Recipient's Responsibility: The taxpayer must review the information on Form 1099-R for accuracy and report the distribution on their federal income tax return. Any discrepancies or errors should be addressed with the financial institution or plan administrator that issued the form.
Form 1099-R is an important document for taxpayers who receive distributions from retirement accounts, as it provides the information needed to accurately report taxable income and comply with federal tax laws. Failure to report distributions or discrepancies between the information reported on Form 1099-R and the taxpayer's tax return may result in IRS inquiries or audits.
For more Dana Anspach videos on finStream, please visit https://www.finstream.tv/featured/dana-anspach/ or visit Dana's company website: https://www.sensiblemoney.com/
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