Did you receive a Form 1099-R but you didn’t make a distribution or execute a rollover during the prior year? Learning more about how Forms 1099-R and 5498 may shed some light.
Need to access your account statement? Log in to the Client Portal and click “Documents” on the left side of the screen.
There are several reasons why people receive 1099-Rs. You will receive a 1099-R if you:
- Take a distribution from a retirement account
- Execute a Roth conversion
- Devalue an asset to zero
- Roll funds over from a qualified plan to an IRA or vice versa
- Roll funds over from an IRA to an HSA
Depending on the reason you receive a 1099-R, you may or may not have tax consequences. However, it is still good to understand the form and why you received it.
If you did one of the first two items on the above list, your reported income will increase by the amount on the 1099-R. If your asset was devalued to zero, you essentially are paying tax on a distribution that has zero value. Tax on something worth nothing is also equal to nothing.
If you received a 1099-R for one of the last two reasons listed above, another reporting form becomes relevant – Form 5498. Like Form 1099-R, Form 5498 is also filed with the IRS by NDTCO as part of our annual reporting requirements. The 5498 will reflect the results of any rollovers you made to accounts held by us.
For example, if you rolled funds from an IRA to an HSA, the 5498 will reflect that the amount reported on the 1099-R was rolled over into an HSA and not received by you personally (the IRS only allows that once in your lifetime). The same is true if you rolled funds over to an IRA from a qualified plan like a 401(k) (these such rollovers can be carried out as often as you’d like). The net result is that the 5498 will indicate that the amount reported on the 1099-R did not result in increased income for the current tax year.
Look To Your Account Statement
Your annual account statement serves as your substitute Form 5498. You can reference this form for your records through the Client Portal. As long as the amount on the 1099-R matches the amount listed on the 5498 as the rollover, the net resulting tax is zero. Keep your statement and Form 1099-R with your tax files for documentation.
For more information about 1099-Rs and 5498s, please feel free to give us a call at 877-742-1270 or send us a message through the Client Portal.