If you have some type of IRA, the financial institution acting as custodian or trustee must give you – and the IRS – an information return each year. The form, called IRS Form 5498, IRA Contribution Information, resembles Form W-2 for reporting wages. It contains information about IRA contributions, rollovers, Roth IRA conversions and required minimum distributions (RMDs).
Reporting applies for traditional IRAs; it also covers Roth IRAs, SEP IRAs, SIMPLE IRAs and deemed IRAs (which are employee contribution plans set up as traditional or Roth IRAs that are tacked on to an employer’s qualified retirement plan). The type of IRA is indicated by a check mark in box 7 of the form. Form 5498 includes information (name, address and federal identification number) about the trustee. It includes the same type of information for the participant, who is the owner of the IRA.
The form lists contributions made to IRAs for the tax year of the form (if no contributions are made, then there is no entry). All IRA contributions for the year from all types of IRAs are added together, with the total entered in box 1. Some types of contributions are then specifically broken out: box 10 for Roth IRAs, box 8 for SEPs, and box 9 for SIMPLEs. Deemed IRAs are treated as regular IRAs; they may be traditional or Roth IRAs. The form does not tell you whether or not the contribution is deductible.
The form (box 2) also reports rollover contributions. Only one rollover is permitted within a 12-month period for IRAs, but there is no cap on the dollar amount of the rollover. Thus, a distribution of $15,000 from an IRA can be rolled over to another IRA; it is reported on this form. (For more on IRA rollovers, see Guide To 401(k) And IRA Rollovers and Avoid Taxes on IRA Rollovers.)
The form does not report direct transfers, called trustee-to-trustee transfers. You can make as many of these transfers each year as you want.
The form is required to be sent to you by May 31, following the year to which the contributions relate. Thus, the 2015 form, which is due by May 31, 2016, includes contributions made in 2015 as well as those made by April 18, 2016, or April 19 for those in Maine and Massachusetts, (the extended due date for 2015 federal income tax returns) which are designated as 2015 contributions.
Because of the date on which the form is furnished, it is not meant to help you report your contribution (if you filed by April 15 you already did this). It is used to help the IRS make sure that the amount of IRA deductions on IRA owners’ tax returns matches what the trustee reports. A taxpayer who claims a deduction that is greater than the amount reported on Form 5498 likely will receive a letter from the IRS referencing the discrepancy. The letter will ask for additional taxes, interest and penalties for any tax underpayment resulting from the deduction in excess of the amount reported on the form.
Conversions and Recharacterizations
Box 3 on the form reports conversions to Roth IRAs. The amount converted to this type of IRA does not limit the amount that can be contributed annually to an IRA, including a Roth IRA.
If you made a conversion and regret the action, you can undo it by recharacterizing the account no later than October 15 following the year in which the conversion was made. This action may be warranted if the value of the account at the time of the conversion has dropped dramatically by October 15. In this way, you do not have to report the income from the conversion (you omit it from a return that is on extension, or file an amended return if you already submitted a return). You can reconvert to the Roth IRA in the following year.
Withdrawal and Distribution Information
Those age 70½ and older, as well as those who inherited IRAs, must take required minimum distributions (RMDs) from the account each year. RMDs for the current year are based on the fair-market value of the account as of December 31 of the prior year. For example, the account’s value on December 31, 2015, determines the RMD for 2016. This amount is reported in box 5 of Form 5498.
The form notes (via a check in box 11) whether an RMD is required for the year in which you receive the form (e.g., the 2015 form notes whether an RMD is necessary for 2016). The form also reports the amount of the RMD that should be taken (based on certain calculations made by the trustee) (box 12b) and the date for the RMD (box 12a).
To facilitate RMDs, the form is required to be furnished by January 31 showing the account’s value as of the previous December 31. Thus, the form showing the value of the account as of December 31, 2015, must be furnished by February 1, 2016 (January 31 is a Sunday). (For more on RMDs, see How to Calculate Required Minimum Distributions.)
If you took a distribution from your IRA of more than $10, you’ll receive a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA, Insurance Contracts, Etc. Information from this form helps you report the distribution and what portion of it is taxable.
The Bottom Line
Understand how Form 5498 is helpful to you in completing your tax return and figuring RMDs when necessary. You don’t have to do anything with the form itself; you don’t attach it to your return. Just keep it with your tax records. (For more on that subject, see How Long Should I Keep My Tax Records?)