"How To" File IRS Form 5498

October 23rd, 2020

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If you contribute to your retirement planning through an Individual Retirement Account (IRA), you need to learn about Form 5498.

Each year, the financial institution in charge of your IRA must provide you and the IRS a Form 5498.

It resembles your W-2 form for reporting wages, with certain differences.

What is Form 5498?

Form 5498 reports all your IRA contributions, rollovers, Roth IRA conversions, and required minimum distributions (RMDs).

Do I need to report my contributions to the IRS?

No. The financial institution or trustee that manages your IRA must report all your contributions during the tax year to the IRS. Your financial institution is required to file this form with the IRS by May 31.

Do I need to file Form 5498 with my tax return?

You do not need to file Form 5498 with your tax return. The copy you receive is for your records only.

Understanding and Reading Form 5498

Form 5498 includes the following information about the financial institution or the trustee as well as the participant:

  • Name
  • Address
  • Federal Identification Number

Box 1 indicates the amount you contributed to a traditional IRA.

Box 2 reports rollover contributions. Only one rollover is permitted within 12 months for IRAs, but there is no cap on the dollar amount of the rollover.

Box 3 reports conversions to Roth IRAs. Any amount converted to this type of IRA does not put any limitations to the amount that can be contributed yearly to an IRA, including a Roth IRA.

Box 4 A recharacterization is the reversal of an IRA conversion, such as from a Roth IRA back to Traditional IRA, generally for tax purposes. To do this, you must instruct your trustee or financial institution to transfer your contributions and earnings to a different type of IRA, with the same financial institution or a different one. These recharacterized distributions are entered in box 4 of Form 5498.

Box 5 If you are 72 or older, you must take Required Minimum Distributions (RMDs) from the account each year. If your spouse or any minor children inherited your account and elected not to roll it over into an account of their own, they are required to take RMDs as well. The amount is based on the account holder’s age and the market value at the end of the previous year. This fair market value at the end of the year on December 31 is listed in box 5 of Form 5498.

Box 7 This indicates the type of IRA you hold – IRA, SEP, SIMPLE, and Roth IRA. While your contributions to all IRAs are listed cumulatively in Box 1, some types of contributions are specifically entered on the form.

Box 8 Your employer or you (if you are self-employed) can contribute to a simplified employee pension (SEP) IRA. All contributions to SEP are listed in box 8.

Box 9 If you participate in a SIMPLE IRA at work, these contributions are listed in box 9.

Box 10 All contributions to the Roth IRA are listed in box 10. Contributions to Roth IRA don’t qualify for a tax deduction, but distributions from this type of account do qualify and are therefore tax-free.

Box 11 If you plan to take an RMD in 2020, your 2019 Form 5498 must indicate it is necessary for 2020. Checking box 11 will indicate this.

Box 12a/12b If box 11 has been checked, boxes 12a and 12b indicate the amount of distribution for RMD to be taken (12a) and the date of RMD (12b).

Note: Direct trustee-to-trustee transfers are not usually reported on Form 5498, including transfers from:

  1. a Traditional IRA to another Traditional IRA or a SEP IRA,
  2. a SIMPLE IRA to another SIMPLE IRA,
  3. a SEP IRA to another SEP IRA or a Traditional IRA
  4. or a Roth IRA to another Roth IRA.

Who Uses Form 5498?

Form 5498 is provided for you to calculate your tax deduction for qualifying IRA contributions you’ve made. This does not necessarily entitle you to deduct the entire amount listed in the various boxes on the form.

If you are under age 50, IRA contribution limits are $6,000 a year and if you are over 50 years of age, this limit increases to $7,000 a year. Any contributions over these amounts are taxable at the time they are made.

For example, let us say you are 45 years of age and you contributed $10,000 towards your IRA. On the Form 5498, this will be listed in Box 1. However, because the contribution limit is $6,000 you can only deduct this amount and not $10,000.

Types of Form 5498

While the regular 5498 form is used to list all your IRA contributions, there are a few variations to Form 5498 that are worth noting.

  • Form 5498 – ESA

This form reports contributions to Coverdell ESA plans. The Coverdell Education Savings Account is a trust or custodial account, established solely for paying qualified education expenses for the designated beneficiary of the account.

  • Form 5498 – SA

This form is used to report contributions to a Health Savings Account (HSA). It is not meant to be filed with your tax return and reports the amount of pre-tax dollars saved for qualified medical expenses.

Why have I received 2 Forms 5498?

You can receive two Forms 5498. While the deadline to file your taxes for the financial year ending on December 31 is April 15, you are still allowed to make contributions to the IRA until April 15. It is for this reason that the deadline for financial institutions to file Form 5498 is May 31.

If you have contributed to the IRA, you may receive the first form before January 31, indicating the fair market value of your account on December 31 the previous year, and a second form by May 31 if you made any contributions from January through April 15.

In conclusion, Form 5498 is not to be filed along with your tax return,but is for your information and required to estimate the tax deduction you are entitled to claim for your contributions. It is the responsibility of your financial institution to file Form 5498 with the IRS.

Consult a tax advisor to maximize your contribution gains and lower your tax bill.

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