Instructions for Forms 1099-R & 5498 |
2003 Tax Year |
Instructions for Forms 1099-R and 5498 - Main Contents
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Specific Instructions for Form 1099-R
File Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for each
person to whom you have made a designated distribution of $10 or more from profit-sharing or retirement plans, any IRAs, annuities,
pensions,
insurance contracts, survivor income benefit plans, permanent and total disability payments under life insurance contracts,
charitable gift
annuities, etc.
Also, report on Form 1099-R death benefit payments made by employers that are not made as part of a pension, profit-sharing, or
retirement plan. See box 1 on page R-6.
Reportable disability payments made from a retirement plan must be reported on Form 1099-R.
Generally, do not report payments subject to withholding of social security and Medicare taxes on this form. Report such payments on
Form W-2, Wage and Tax Statement.
Do not report amounts totally exempt from tax, such as workers' compensation and Department of Veterans Affairs (VA) payments. However,
if part of the distribution is taxable and part is nontaxable, report the entire distribution.
Military retirement annuities.
Report payments to military retirees or payments of survivor benefit annuities on Form 1099-R. Report military retirement
pay awarded as a property
settlement to a former spouse under the name and taxpayer identification number (TIN) of the recipient, not that of the military
retiree.
Governmental section 457(b) plans.
Report on Form 1099-R, not Form W-2, income tax withholding and distributions from a governmental section 457(b) plan
maintained by a state or
local government employer. Distributions from a governmental section 457(b) plan to a participant or beneficiary include all
amounts that are paid
from the plan. However, until further guidance is issued, payers may continue to rely on the reporting and withholding requirements
specified in
Notice 2000-38, 2000-2 C.B. 174.
Nonqualified plans.
Report any reportable distributions from commercial annuities. Report distributions to plan participants from nonqualified deferred
compensation plans including nongovernmental section 457(b) plans on Form W-2, not on Form 1099-R. However, report distributions
to
beneficiaries of deceased employees on Form 1099-R. See Box 1 on page R-6.
Charitable gift annuities.
If cash or capital gain property is donated in exchange for a charitable gift annuity, report distributions from the
annuity on Form 1099-R. See
Charitable gift annuities on page R-6.
Life insurance, annuity, and endowment contracts.
Report payments of matured or redeemed annuity, endowment, and life insurance contracts. However, you do not need
to file Form 1099-R to report the
surrender of a life insurance contract if it is reasonable to believe that none of the payment is includible in the income
of the recipient. If you
are reporting the surrender of a life insurance contract, see Code 7 on page R-10.
Also report premiums paid by a trustee or custodian for the cost of current life or other insurance protection. Costs
of current life insurance
protection are not subject to the 10% additional tax under section 72(t). See Cost of current life insurance protection on page R-6.
Section 1035 exchange.
A tax-free section 1035 exchange is the exchange of (a) a life insurance contract for another life insurance, endowment, or annuity
contract, (b) an endowment contract for an annuity contract or for another endowment contract that provides for regular payments to begin
no later than they would have begun under the old contract, and (c) an annuity contract for another annuity contract. However, the
distribution of other property or the cancellation of a contract loan at the time of the exchange may be taxable and reportable
on a separate Form
1099-R.
These exchanges of contracts are generally reportable on Form 1099-R. However, reporting on Form 1099-R is not required
if (a) the
exchange occurs within the same company, (b) the exchange is solely a contract for contract exchange, as defined above, that does not
result in a designated distribution, and (c) the company maintains adequate records of the policyholder's basis in the contracts. For
example, a life insurance contract issued by Company X received in exchange solely for another life insurance contract previously
issued by Company X
does not have to be reported on Form 1099-R as long as the company maintains the required records. See Rev. Proc. 92-26, 1992-1
C.B. 744.
For more information on reporting taxable exchanges, see box 1 on page R-6.
For deemed IRAs under section 408(q), use the rules below for traditional IRAs or Roth IRAs as applicable.
IRAs other than Roth IRAs.
Distributions from any individual retirement arrangement (IRA), except a Roth IRA, must be reported in boxes 1 and
2a regardless of the amount. You
may check the “ Taxable amount not determined” box in box 2b. But see the instructions for box 2a on page R-6 for how to report the withdrawal of
IRA contributions under section 408(d)(4). Also see Transfers on page R-3 for information on trustee-to-trustee transfers, including
recharacterizations. The direct rollover provisions (on this page) do not apply to distributions from any IRA. However, taxable
distributions from
traditional IRAs and SEP IRAs may be rolled over into an eligible retirement plan (see section 408(d)(3)). SIMPLE IRAs may
also be rolled over into an
eligible retirement plan, but only after the 2-year period described in section 72(t)(6).
An IRA includes all investments under one IRA plan or account. File only one Form 1099-R for distributions from all
investments under one plan that
are paid in 1 year to one recipient, unless you must enter different codes in box 7. You do not have to file a separate Form
1099-R for each
distribution under the plan.
Roth IRAs.
For distributions from a Roth IRA, report the gross distribution in box 1 but generally leave box 2a blank. Check the “ Taxable amount
not determined” box in box 2b. Enter Code J, T, or Q as appropriate in box 7. You must enter Code 5, 8, or P with Codes J and T, and 8 or
P with
Code Q, if applicable. For the withdrawal of excess contributions, see Box 2a on page R-6. It is not necessary to mark the IRA/SEP/SIMPLE
checkbox.
Roth IRA conversions.
You must report an IRA that is converted or reconverted this year to a Roth IRA in boxes 1 and 2a, even if the conversion
is a trustee-to-trustee
transfer or is with the same trustee. Enter Code 2 or 7 in box 7 as appropriate.
Conduit IRAs.
If you know the distribution is from a conduit IRA, follow these rules. If a distribution from a conduit IRA is paid
to the participant, report the
full amount in boxes 1 and 2a, and use Code 1 or 7 in box 7 depending on the participant's age. If a distribution from a conduit
IRA is paid to the
trustee of, or is transferred to, an employer plan, report the distribution in box 1, enter 0 (zero) in box 2a, and use Code
G in box 7.
If a traditional or Roth IRA is revoked during its first 7 days (under Regulations section 1.408-6(d)(4)(ii)), the distribution
from the IRA must
be reported. In addition, Form 5498, IRA Contribution Information, must be filed to report any regular, rollover, Roth IRA conversion, SEP,
or SIMPLE contribution to an IRA that is revoked.
If a regular contribution is made to a traditional or Roth IRA that later is revoked, and distribution is made to the taxpayer, enter
the gross distribution in box 1. If no earnings are distributed, enter 0 (zero) in box 2a and Code 8 in box 7 for a traditional
IRA and Code 8 with
Code J for a Roth IRA. If earnings are distributed, enter the amount of earnings in box 2a. These earnings could be subject
to the 10% early
distribution tax under section 72(t). If they are subject to that tax, enter Code 1 in box 7 for a traditional IRA or Code
J in box 7 for a Roth IRA;
if the earnings are not subject to that tax, enter Code 8 for a traditional IRA and Codes T and 8 for a Roth IRA. If a rollover
contribution is made to a traditional or Roth IRA that later is revoked, and distribution is made to the taxpayer, enter in boxes 1 and
2a of
Form 1099-R the gross distribution and the appropriate code in box 7 (Code J or T for a Roth IRA). Follow this same procedure
for a transfer from a
traditional or Roth IRA to another IRA of the same type that later is revoked. The distribution could be subject to the 10%
early distribution tax
under section 72(t).
If an IRA conversion contribution is made to a Roth IRA that later is revoked, and distribution is made to the taxpayer, enter the gross
distribution in box 1 of Form 1099-R. If no earnings are distributed, enter 0 (zero) in box 2a and Code J or T in box 7. If
earnings are distributed,
enter the amount of the earnings in box 2a. These earnings could be subject to the 10% early distribution tax under section
72(t). If they are subject
to the tax, enter Code J in box 7; if the earnings are not subject to that tax, enter Codes T and 8.
If you know that the taxpayer deducted the contribution to a traditional IRA, report the total amount distributed in box 2a
and use the appropriate
code in box 7.
If an employer SEP (simplified employee pension) IRA or SIMPLE (savings incentive match plan for employees)
IRA plan contribution is made and the SEP IRA or SIMPLE IRA is revoked by the employee, report the distribution as fully taxable.
For more information, see Rev. Proc. 91-70, 1991-2 C.B. 899.
Deductible Voluntary Employee Contributions (DECs)
If you are reporting a total distribution from a plan that includes a distribution of DECs, file two Forms 1099-R—one to report
the
distribution of DECs, the other to report the distribution from the other part of the plan. Report the distribution of DECs
in boxes 1 and 2a on the
separate Form 1099-R. However, for the direct rollover (explained below) of funds that include DECs, file only one Form 1099-R
to report the direct
rollover of the entire amount.
You must report a direct rollover of an eligible rollover distribution. A direct rollover is the direct payment of the distribution
from a
qualified plan (including a governmental section 457(b) plan) or tax-sheltered annuity to a traditional IRA or other eligible
retirement plan. A
direct rollover may be made for the employee, for the employee's surviving spouse, or for the spouse or former spouse who
is an alternate payee under
a qualified domestic relations order (QDRO). If the distribution is paid to the surviving spouse, the distribution is treated
in the same manner as if
the spouse were the employee.
An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the employee (including net
unrealized appreciation (NUA)) from a qualified plan (including a governmental section 457(b) plan) or a tax-sheltered annuity
except:
- One of a series of substantially equal periodic payments made (at least annually) over:
- The life of the employee (or the joint lives of the employee and the employee's designated beneficiary),
- The life expectancy of the employee (or the joint life and last survivor expectancy of the employee and the employee's designated
beneficiary), or
- A specified period of 10 years or more.
- A required minimum distribution (under section 401(a)(9)). A plan administrator is permitted to assume there is no designated
beneficiary
for purposes of determining the minimum distribution.
- Elective deferrals (under section 402(g)(3)) and earnings returned because of the section 415 limits.
- Corrective distributions of excess deferrals (under section 402(g)) and earnings.
- Corrective distributions of excess contributions under a qualified cash or deferred arrangement (under section 401(k)) and
excess aggregate
contributions (under section 401(m)) and earnings.
- Loans treated as deemed distributions (under section 72(p)). But plan loan offset amounts can be eligible rollover distributions.
See
Regulations section 1.402(c)-2, Q/A-9.
- Section 404(k) dividends.
- Cost of current life insurance protection.
- Distributions to a payee other than the employee, the employee's surviving spouse, or a spouse or former spouse who is an
alternate payee
under a QDRO.
- Any hardship distribution.
Amounts paid under an annuity contract purchased for and distributed to a participant under a qualified plan can qualify as
eligible rollover
distributions. See Regulations section 1.402(c)-2, Q/A-10.
Any part of an eligible rollover distribution that is not a direct rollover is subject to 20% income tax withholding. See
Box 4 on page
R-7.
Reporting a direct rollover.
Report a direct rollover in box 1 and a 0 (zero) in box 2a. You do not have to report capital gain in box 3 or NUA
in box 6. Enter Code G in box 7.
Prepare the form using the name and social security number (SSN) of the person for whose benefit the funds were rolled over
(generally the
participant), not those of the trustee of the traditional IRA or other plan to which the funds were rolled.
Also, use Code G (with Code 4) for a surviving spouse who elects a direct rollover to an IRA or a qualified plan.
Prepare the form using the name
and SSN of the surviving spouse.
If you receive a direct rollover to an IRA, you must prepare Form 5498. If you receive a direct rollover to a qualified
plan (including a
governmental section 457(b) plan) or tax-sheltered annuity, no report is required.
If part of the distribution is a direct rollover and part is distributed to the recipient, prepare two Forms 1099-R.
For more information on eligible rollover distributions, including substantially equal periodic payments, required
minimum distributions, and plan
loan offset amounts, see Regulations sections 1.402(c)-2 and 1.403(b)-2. Also, see Rev. Rul. 2002-62, 2002-42 I.R.B. 710,
for guidance on
substantially equal periodic payments that began after December 31, 2002.
Explanation to Recipients Before Eligible Rollover Distributions (Section 402(f) Notice)
For qualified plans, tax-sheltered annuities, and governmental section 457(b) plans, no more than 90 days and no fewer than
30 days before making
an eligible rollover distribution (or before the annuity starting date), the plan administrator must provide a written explanation
to each recipient
(section 402(f) notice). However, if the recipient who has received the section 402(f) notice affirmatively elects a distribution,
you will not fail
to satisfy the timing requirements merely because you make the distribution fewer than 30 days after you provided the notice
as long as you meet the
requirements of Regulations section 1.402(f)-1, Q/A-2. You may provide the 402(f) notice more than 90 days before a distribution
if you also provide a
summary of the notice during the 90-day/30-day period before the distribution.
The notice must explain the rollover rules, the special tax treatment for lump-sum distributions, the direct rollover option
(and any default
procedures), the mandatory 20% withholding rules, and an explanation of how distributions from the plan to which the rollover
is made may have
different restrictions and tax consequences than the plan from which the rollover is made. The notice and summary are permitted
to be sent either as a
written paper document or through an electronic medium reasonably accessible to the recipient; see Regulations section 1.402(f)-1,
Q/A- 5.
For periodic payments that are eligible rollover distributions, you must provide the notice before the first payment and at
least once a year as
long as the payments continue. For tax-sheltered annuities, the payer must provide an explanation of the direct rollover option
within the time period
described above or some other reasonable period of time.
Notice 2002-3, 2002-2 I.R.B. 289, contains model notices that the plan administrator can use to satisfy the notice requirements.
Generally, do not report transfers between trustees or issuers (unless they are direct rollovers from qualified plans) that
involve no payment or
distribution of funds to the participant, including a trustee-to-trustee transfer from one IRA to another (unless they are
recharacterized IRA
contributions or Roth IRA conversions) or from one tax-sheltered (section 403(b)) arrangement to another.
IRA recharacterizations.
You must report each recharacterization of an IRA contribution. If a participant makes a contribution to an IRA (first
IRA) for a year, the
participant may choose to recharacterize the contribution by transferring, in a trustee-to-trustee transfer, any part of the
contribution (plus
earnings) to another IRA (second IRA). The contribution is treated as made to the second IRA (recharacterization). A recharacterization
may be made
with the same trustee or with another trustee. The trustee of the first IRA must report the recharacterization as a distribution
on Form 1099-R (and
the contribution to the first IRA and its character on Form 5498).
Enter the fair market value (FMV) of the amount recharacterized in box 1, 0 (zero) in box 2a, and Code R in box 7
if reporting a recharacterization
of a prior-year (2002) contribution or Code N if reporting a recharacterization of a contribution in the same year (2003).
It is not necessary to
check the IRA/SEP/SIMPLE checkbox. For more information, see Notice 2000-30, 2000-1 C.B. 1266.
Roth IRA conversions.
A Roth IRA conversion is not considered a trustee-to-trustee transfer. You must report a Roth IRA conversion or reconversion
as a distribution.
Therefore, for an IRA that is converted to a Roth IRA, even with the same trustee, you must report the amount converted in
boxes 1 and 2a. Use Code 2
or 7 in box 7 as appropriate.
SIMPLE IRAs.
Do not report a trustee-to-trustee transfer from one SIMPLE IRA to another SIMPLE IRA. However, you must report as
a taxable distribution in boxes
1 and 2a a trustee-to-trustee transfer from a SIMPLE IRA to an IRA that is not a SIMPLE IRA during the 2-year period beginning
on the day
contributions are first deposited in the individual's SIMPLE IRA by the employer. Use Code S in box 7 if appropriate.
Section 1035 exchange.
You may have to report exchanges of insurance contracts, including an exchange under section 1035, under which any
designated distribution may be
made. For a section 1035 exchange that is in part taxable, file a separate Form 1099-R to report the taxable amount. See Section 1035 exchange
on page R-1.
Transfer of IRA to spouse.
If you transfer an interest in an IRA from one spouse to another spouse under a divorce or separation instrument,
the transfer is tax free. Do
not report such a transfer on Form 1099-R.
You must report on Form 1099-R corrective distributions of excess deferrals, excess contributions and excess aggregate contributions
under section
401(a) plans, section 401(k) cash or deferred arrangements, section 403(a) annuity plans, section 403(b) salary reduction
agreements, and salary
reduction simplified employee pensions (SARSEPs) under section 408(k)(6). Corrective distributions of an excess plus earnings
are reportable on Form
1099-R for the year of the distribution regardless of when the distribution is taxable to the participant. Enter Code 8, P,
or in some cases D, in box
7 to designate the distribution and the year it is taxable.
The total amount of the elective deferral is reported in Box 12 of Form W-2. See the Instructions for Forms W-2 and W-3 for more
information.
If the excess and the earnings are taxable in two different years, you must issue two Forms 1099-R to designate the year each
is taxable.
You must advise the plan participant at the time of the distribution of the year(s) in which the distribution is taxable and
that it may be
necessary to file an amended return for a prior tax year.
For more information about reporting corrective distributions see: the Guide to Distribution Codes on pages R-10 and R-11; Notice 89-32,
1989-1 C.B. 671; Notice 88-33, 1988-1 C.B. 513; Notice 87-77, 1987-2 C.B. 385; Rev. Proc. 91-44, 1991-2 C.B. 733 (SARSEPs);
and the Regulations under
sections 401(k), 401(m), and 402(g).
Excess deferrals.
Excess deferrals under section 402(g) can occur in 401(k) plans, 403(b) plans, or SARSEPs. If distributed by April
15 of the year following the
year of deferral, the excess is taxable to the participant in the year of deferral, but the earnings are taxable in the year
distributed. Except for a
SARSEP, if the distribution occurs after April 15, the excess is taxable in the year of deferral and the year distributed. The earnings are
taxable in the year distributed. For a SARSEP, excess deferrals not withdrawn by April 15 are considered regular IRA contributions
subject to the IRA
contribution limits. Corrective distributions of excess deferrals are not subject to Federal income tax withholding or social
security and Medicare
taxes. For losses on excess deferrals, see Losses below.
Excess contributions.
Excess contributions can occur in a 401(k) plan or a SARSEP. For a 401(k) plan, if the withdrawal of the excess plus
earnings occurs within 21/ months after the close of the plan year, the excess and earnings are taxable to the participant
in the year deferred. But if the
corrective distribution is made after the 2½-month period, or the excess contribution (not including earnings) (and excess
aggregate
contributions (not including earnings) in the case of a 401(k) plan) is less than $100 (de minimus rule), the excess and earnings
are taxable in the
year distributed. For recharacterized excess contributions, the excess is taxable in the year a corrective distribution would
have occurred. (No
earnings are allocated to recharacterized amounts.) For a SARSEP, the employer must notify the participant by March 15 of the year after
the year the excess contribution was made that the participant must withdraw the excess and earnings. The excess contribution
is taxable to the
participant in the year of deferral and the earnings are taxable in the year withdrawn. If the excess contribution (not including
earnings) is less
than $100, the excess is taxable in the year of notification and the earnings are taxable in the year withdrawn. An excess
contribution not withdrawn
by April 15 of the year after the year of notification is considered a regular IRA contribution subject to the IRA contribution
limits.
Excess contributions distributed within the 2½-month period are not subject to Federal income tax withholding or social
security and Medicare taxes. But amounts distributed from a 401(k) plan after the 2½-month period are subject to Federal income
tax
withholding under section 3405.
Excess aggregate contributions.
Excess aggregate contributions under section 401(m) can occur in 401(a), 401(k), 403(a), and 403(b) plans. A corrective
distribution of excess
aggregate contributions plus earnings within 2½ months after the close of the plan year is taxable to the participant in the
year the
contributions were made. A corrective distribution made after the 2½-month period is taxable in the year distributed. Report
the gross
distribution in box 1 of Form 1099-R. In box 2a, enter the excess and earnings distributed less any after-tax contributions.
If the total excess
contributions and excess aggregate contributions distributed are less than $100 (excluding earnings), the distribution is
taxable in the year of
distribution.
A distribution made within 2½ months after the close of the plan year is not subject to Federal income tax withholding or
social security and Medicare taxes. But amounts distributed after 2½ months are subject to Federal income tax withholding
under section
3405.
Losses.
If a corrective distribution of an excess deferral is made in a year after the year of deferral and a net loss has
been allocated to the excess
deferral, report the corrective distribution amount in boxes 1 and 2a of Form 1099-R for the year of the distribution with
the appropriate
distribution code in box 7. However, taxpayers must include the total amount of the excess deferral (unadjusted for loss)
in income in the year of
deferral, and they may report a loss on the tax return for the year the corrective distribution is made. Therefore, if there
are no employer
securities distributed, show the actual cash and/or fair market value (FMV) of property distributed in boxes 1 and 2a, and
make no entry in box 5. If
only employer securities are distributed, show the FMV of the securities in boxes 1 and 2a and make no entry in box 5 or 6.
If both employer
securities and other property are distributed, show the actual cash and/or FMV of the property distributed in box 1, the gross
less any NUA on
employer securities in box 2a, no entry in box 5, and any NUA in box 6.
Excess Annual Additions Under Section 415
You must report on Form 1099-R distributions made under Regulations section 1.415-6(b)(6)(iv) of elective deferrals or a return
of employee
contributions (and gains attributable to such elective deferrals or employee contributions) to reduce excess annual additions
arising from the
allocation of forfeitures, a reasonable error in estimating a participant's compensation, or a reasonable error in determining
the amount of elective
deferrals that may be made for an individual under the limits of section 415.
Such distributions are not eligible rollover distributions although they are subject to income tax withholding under section
3405. They are not
subject to social security, Medicare, or Federal Unemployment Tax Act (FUTA) taxes. In addition, such distributions are not
subject to the 10% early
distribution tax under section 72(t).
You may report the distribution of elective deferrals and employee contributions (and gains attributable to such elective
deferrals and employee
contributions) on the same Form 1099-R. However, if you made other distributions during the year, report them on a separate
Form 1099-R. Because the
distribution of elective deferrals is fully taxable in the year distributed (no part of the distribution is a return of the
investment in the
contract), report the total amount of the distribution in boxes 1 and 2a. Leave box 5 blank, and enter Code E in box 7. For
a return of employee
contributions plus gains, enter the gross distribution in box 1, the gains attributable to the employee contributions being
returned in box 2a, and
the employee contributions being returned in box 5. Enter Code E in box 7. For more information, see Rev. Proc. 92-93, 1992-2
C.B. 505.
Certain Excess Amounts Under 403(b) Plans
A corrective distribution under the Employee Plans Compliance Resolution System to the participant of contributions to a 403(b)
plan (plus gains
attributable to such contributions) that were in excess of the limits under section 415 or section 403(b)(2) (the exclusion
allowance limit) is
treated the same as corrective distributions of elective deferrals to satisfy the limits under section 415. It is taxable
to the participant in the
year of distribution. See Excess Annual Additions Under Section 415 above.
Failing the ADP or ACP Test After a Total Distribution
If you make a total distribution in 2003 and file a Form 1099-R with the IRS and then discover in 2004 that the plan failed either the
section 401(k)(3) actual deferral percentage (ADP) test for 2003 and you compute excess contributions or the section 401(m)(2) actual
contribution percentage (ACP) test and you compute excess aggregate contributions, you must recharacterize part of the total
distribution as excess
contributions or excess aggregate contributions. First, file a CORRECTED Form 1099-R for 2003 for the correct amount of the
total distribution (not
including the amount recharacterized as excess contributions or excess aggregate contributions). Second, file a new Form 1099-R for 2003
for the excess contributions or excess aggregate contributions and allocable earnings.
To avoid a late filing penalty if the new Form 1099-R is filed after the due date, enter in the bottom margin of Form 1096, Annual
Summary and Transmittal of U.S. Information Returns, the words “Filed To Correct Excess Contributions.”
You must also issue copies of the Forms 1099-R to the plan participant with an explanation of why these new forms are being
issued.
Loans Treated as Distributions
A loan from a qualified plan under sections 401 and 403(a) and (b), and a plan maintained by the United States, a state or
political subdivision,
or any of its subsidiary agencies made to a participant or beneficiary is not treated as a distribution from the plan if the loan satisfies
the following requirements:
- The loan is evidenced by an enforceable agreement,
- The agreement specifies that the loan must be repaid within 5 years, except for a principal residence,
- The loan must be repaid in substantially level installments (at least quarterly), and
- The loan amount does not exceed the limits in section 72(p)(2)(A) (maximum limit is equal to the lesser of 50% of the vested
account balance
or $50,000).
Certain exceptions, cure periods, and suspension of the repayment schedule may apply.
The loan agreement must specify the amount of the loan, the term of the loan, and the repayment schedule. The agreement may
include more than one
document.
If a loan fails to satisfy 1, 2, or 3, the balance of the loan is a deemed distribution. The distribution may
occur at the time the loan is made or later if the loan is not repaid in accordance with the repayment schedule.
If a loan fails to satisfy 4 at the time the loan is made, the amount that exceeds the amount permitted to be loaned is a deemed
distribution.
Deemed distribution.
If a loan is treated as a deemed distribution, it is reportable on Form 1099-R using the normal taxation rules of
section 72, including tax basis
rules. The distribution also may be subject to the 10% early distribution tax under section 72(t). It is not eligible to be
rolled over to an eligible
retirement plan nor is it eligible for the 10-year tax option. On Form 1099-R, complete the appropriate boxes, including boxes
1 and 2a, and enter
Code L in box 7. Also, enter Code 1, if applicable.
Interest that accrues after the deemed distribution of a loan is not an additional loan, and, therefore, is not reportable
on Form 1099-R.
Loans that are treated as deemed distributions or that are actual distributions are subject to Federal income tax
withholding. If a distribution
occurs after the loan is made, you must withhold only if you distributed cash or property (other than employer securities)
at the time of the deemed
or actual distribution. See section 72(p), 72(e)(4)(A), and Regulations section 1.72(p)-1.
Subsequent repayments.
If a participant makes any cash repayments on a loan that was reported on Form 1099-R as a deemed distribution, the repayments increase
the participant's tax basis in the plan as if the repayments were after-tax contributions. However, such repayments are not
treated as after-tax
contributions for purposes of section 401(m) or 415(c)(2)(B).
For a deemed distribution that was reported on Form 1099-R but was not repaid, the deemed distribution does not increase the
participant's basis.
If a participant's accrued benefit is reduced (offset) to repay a loan, the amount of the account balance that is
offset against the loan is an
actual distribution. Report it as you would any other actual distribution. Do not enter Code L in box 7.
The IRS administers a letter-forwarding program that could help plan administrators contact missing retirement plan participants
(or possibly their
beneficiaries). To inform individuals of their rights to benefits under a retirement plan, the IRS will forward letters from
plan administrators to
the missing individuals if the administrators provide the names and social security numbers (SSNs) of the missing individuals.
However, the IRS cannot
disclose individuals' addresses or give confirmation of letter delivery. All undelivered letters will be destroyed. For further
information, see Rev.
Proc. 94-22, 1994-1 C.B. 608, or contact your IRS office.
If you filed a Form 1099-R with the IRS and later discover that there is an error on it, you must correct it as soon as possible.
For example, if
you transmit a direct rollover and file a Form 1099-R with the IRS reporting that none of the direct rollover is taxable by
entering 0 (zero) in box
2a, and you then discover that part of the direct rollover consists of required minimum distributions under section 401(a)(9),
you must file a
corrected Form 1099-R. See part I in the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.
The payer, trustee, or plan administrator must file Form 1099-R using the same name and employer identification number (EIN)
used to deposit any
tax withheld and to file Form 945, Annual Return of Withheld Federal Income Tax.
If you make a distribution to a beneficiary, trust, or estate, prepare Form 1099-R using the name and TIN of the beneficiary,
trust, or estate, not
that of the decedent. If there are multiple beneficiaries, report on each Form 1099-R only the amount paid to the beneficiary
whose name appears on
the Form 1099-R, and enter the percentage in box 9a, if applicable.
Alternate Payee Under a Qualified Domestic Relations Order (QDRO)
Distributions to an alternate payee who is a spouse or former spouse of the employee under a QDRO are reportable on Form 1099-R
using the name and
TIN of the alternate payee. If the alternate payee under a QDRO is a non-spouse, enter the name and TIN of the employee. However,
see Transfer of
IRA to spouse on page R-3.
If income tax is withheld under section 3405 on a distribution to a nonresident alien, report the distribution and withholding
on Form 1099-R. Also
file Form 945 to report the withholding. See the Presumption Rules in part O of the 2003 Instructions for Forms 1099, 1098,
5498, and W-2G.
However, any payments to a nonresident alien from any trust under section 401(a), any annuity plan under 403(a), or any annuity,
custodial account,
or retirement income account under 403(b) are subject to withholding under section 1441. Report the distribution and withholding
on Form
1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person's U.S. Source Income
Subject to Withholding.
If you are required to file Form 1099-R, you must furnish a statement to the recipient. For more information about the requirement
to furnish a
statement to each recipient, see part H in the General Instructions for Forms 1099, 1098, 5498, and W-2G.
Do not enter a negative amount in any box on Form 1099-R.
Box 1. Gross Distribution
Enter the total amount of the distribution before income tax or other deductions were withheld. Include direct rollovers, IRA rollovers
to accepting employer plans, premiums paid by a trustee or custodian for the cost of current life or other insurance protection,
and the gross amount
of any IRA distribution, including a recharacterization and a Roth IRA conversion. Also include in this box distributions
to plan
participants from governmental section 457(b) plans. However, in the case of a distribution by a trust representing CDs redeemed early,
report
the net amount distributed. Also, see Box 6 on page R-8.
Include in this box the value of U.S. Savings Bonds distributed from a plan. Enter the appropriate taxable amount in box 2a. Furnish a
statement to the plan participant showing the value of each bond at the time of distribution. This will provide him or her
with the information
necessary to figure the interest income on each bond when it is redeemed.
In addition to reporting distributions to beneficiaries of deceased employees, report here any death benefit payments made by employers
that are not made as part of a pension, profit-sharing, or retirement plan. Also enter these amounts in box 2a; enter Code
4 in box 7.
Do not report accelerated death benefits on Form 1099-R. Report them on Form 1099-LTC, Long-Term Care and Accelerated Death Benefits.
For section 1035 exchanges that are reportable on Form 1099-R, enter the total value of the contract in box 1, 0 (zero) in box 2a, the
total premiums paid in box 5, and Code 6 in box 7.
Employer securities and other property.
If you distribute employer securities or other property, include in box 1 the FMV of the securities or other property
on the date of distribution.
If there is a loss, see Losses on this page.
If you are distributing worthless property only, you are not required to file Form 1099-R. However, you may file and
enter 0 (zero) in boxes 1 and
2a and any after-tax employee contributions in box 5.
Charitable gift annuities.
If cash or capital gain property is donated in exchange for a charitable gift annuity, report distributions as follows.
Enter in:
- Box 1 the total amount distributed during the year,
- Box 2a the taxable amount,
- Box 3 any amount taxable as capital gain,
- Box 5 any nontaxable amount, and
- Box 7 the Code F.
See the specific line instructions for more information.
Generally, you must enter the taxable amount in box 2a. However, if you are unable to reasonably obtain the data needed to
compute the taxable
amount, leave this box blank. Do not enter excludable or tax-deferred amounts reportable in boxes 5, 6, and 8.
For a direct rollover from a qualified plan (including a governmental section 457(b) plan) or tax-sheltered annuity, for a
distribution from a
conduit IRA that is payable to the trustee of or is transferred to an employer plan, for an IRA recharacterization, or for
a nontaxable section 1035
exchange of life insurance, annuity, or endowment contracts, enter 0 (zero) in box 2a.
Cost of current life insurance protection.
Include current life insurance protection costs (net premium costs) that were reported in box 1. However, do not report
these costs and a
distribution on the same Form 1099-R. Use a separate Form 1099-R for each. For the cost of current life insurance protection,
enter Code 9 in box 7.
See Regulations section 1.72-16(b) and Notice 2002-8, 2002-4 I.R.B. 398, for information on the cost of premiums paid by an
employees' trust under a
qualified plan for current life insurance protection taxable to plan participants or their beneficiaries.
DECs.
Include DEC distributions in this box. Also see Deductible Voluntary Employee Contributions (DECs) on page R-2.
Annuity starting date in 1998 or later.
If you made annuity payments from a qualified plan (under section 401(a), 403(a), or 403(b)) and the annuity starting
date is in 1998 or later, you
must use the simplified method (under section 72(d)(1)) to figure the taxable amount. Under this method, the expected number of
payments
you use to figure the taxable amount depends on whether the payments are based on the life of one or more than one person.
See Notice 98-2, 1998-1
C.B. 266, and Pub. 575, Pension and Annuity Income, to help you figure the taxable amount to enter in box 2a.
Annuity starting date after November 18, 1996, and before 1998.
Under the simplified method for figuring the taxable amount, the expected number of payments is based only on the
primary annuitant's age on the
annuity starting date. See Notice 98-2.
Annuity starting date before November 19, 1996.
If you properly used the rules in effect before November 19, 1996, for annuities that started before that date, continue
to report using those
rules. No changes are necessary.
IRA or SEP.
Generally, you are not required to compute the taxable amount of a traditional IRA or SEP nor designate whether any
part of a distribution is a
return of basis attributable to nondeductible contributions. Therefore, report the total amount distributed from a traditional
IRA or SEP in box 2a.
This will be the same amount reported in box 1. Check the “ Taxable amount not determined” box in box 2b.
However, for a distribution by a trust representing CDs redeemed early, report the net amount distributed. Do not
include any amount paid for IRA
insurance protection in this box.
For a distribution of contributions plus earnings from an IRA under section 408(d)(4), report the gross distribution in box 1, only the
earnings in box 2a, and enter Code 8 or P, whichever is applicable, in box 7. Enter Code 1, 2, or 4, if applicable.
For a distribution of contributions without earnings after the due date of the individual's return, under section 408(d)(5), enter 0
(zero). Use Code 1 or 7 in box 7 depending on the age of the participant. For a traditional IRA and a SEP IRA rolled over
to an accepting employer
plan, enter the gross amount in box 1, zero (-0-) in box 2a, and Code G in box 7.
SIMPLE.
Enter the total amount distributed from a SIMPLE IRA in box 2a. For a SIMPLE IRA rolled over to an accepting employer
plan after the 2-year period
(see section 72(t)(6)), enter the gross amount in box 1, zero (-0-) in box 2a, and Code G in box 7.
Roth IRA.
For a distribution from a Roth IRA, report the total distribution in box 1 and leave box 2a blank except in the case
of an IRA revocation (see page
R-2) and a recharacterization (see page R-3). Use Code J, Q, or T as appropriate in box 7. Use Code 5, 8, or P, if applicable,
in box 7 with Code J or
T and Code 8 or P with Code Q.
However, for the distribution of excess Roth IRA contributions, report the gross distribution in box 1 and only the
earnings in box 2a. Enter Code
J or Q and 8 or P in box 7.
Roth IRA conversion.
Report the total amount converted or reconverted from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA in boxes
1 and 2a. A conversion or
reconversion is considered a distribution and must be reported even if it is with the same trustee and even if the conversion
is done by a
trustee-to-trustee transfer. For a Roth IRA conversion, use Code 2 in box 7 if the participant is under age 59½ or Code 7
if the
participant is at least age 59½. Also, check the IRA/SEP/SIMPLE box in box 7.
Losses.
If a distribution is a loss, do not enter a negative amount in this box. For example, if stock is distributed but
the value is less than the
employee's after-tax contributions, enter the value of the stock in box 1, leave box 2a blank, and enter the employee's contributions
in box 5.
For a plan with no after-tax contributions, even though the value of the account may have decreased, there is no loss
for reporting purposes.
Therefore, if there are no employer securities distributed, show the actual cash and/or FMV of property distributed in boxes
1 and 2a, and make no
entry in box 5. If only employer securities are distributed, show the FMV of the securities in boxes 1 and 2a and make no
entry in box 5 or 6. If both
employer securities and cash or other property are distributed, show the actual cash and/or FMV of the property (including
employer securities)
distributed in box 1, the gross less any NUA on employer securities in box 2a, no entry in box 5, and any NUA in box 6.
Corrective distributions.
Enter in box 2a the amount of excess deferrals, excess contributions, or excess aggregate contributions (other than
employee contributions). See
Corrective Distributions on page R-3.
Box 2b. Taxable Amount not Determined
Enter an “X” in this box only if you are unable to reasonably obtain the data needed to compute the taxable amount. If you check this
box,
leave box 2a blank unless you are reporting a traditional IRA, SEP IRA, or SIMPLE IRA distribution. Except for IRAs, make
every effort to compute the
taxable amount. However, see IRA Revocation (page R-2) and Corrective Distributions (page R-3).
Box 2b. Total Distribution
Enter an “X” in this box only if the payment shown in box 1 is a total distribution. A total distribution is one or more distributions
within
1 tax year in which the entire balance of the account is distributed. If periodic or installment payments are made, mark this
box in the year the
final payment is made.
Box 3. Capital Gain (Included in Box 2a)
Charitable gift annuities.
Report in box 3 any amount from a charitable gift annuity that is taxable as a capital gain. Report in box 1 the
total amount distributed during
the year. Report in box 2a the taxable amount. If any amount is taxable as a capital gain, report it in box 3. Advise the
annuity recipient of any
amount in box 3 subject to the 28% rate gain, such as for collectibles, and any unrecaptured section 1250 gain. Report in
box 5 any nontaxable amount.
Enter Code F in box 7. See Regulations section 1.1011-2(c), Example 8. Also see Charitable gift annuities on page R-6.
Special rule for participants born before January 2, 1936 (or their beneficiaries).
For lump-sum distributions from qualified plans only, enter the amount in box 2a eligible for the capital gain election under section
1122(h)(3) of the Tax Reform Act of 1986, 1986-3 (Vol. 1) C.B. 1, 387 and section 641(f)(3) of the Economic Growth and Tax
Relief Reconciliation Act
of 2001. Enter the full amount eligible for the capital gain election. You should not complete this box for a direct rollover.
To compute the months of an employee's active participation before 1974, count as 12 months any part of a calendar year in
which an employee
actively participated under the plan; for active participation after 1973, count as 1 month any part of a month in which the
employee actively
participated under the plan. See the Example below.
Active participation begins with the first month in which an employee became a participant under the plan and ends with the
earliest of:
- The month in which the employee received a lump-sum distribution under the plan;
- For an employee, other than a self-employed person or owner-employee, the month in which the employee separates from service;
- The month in which the employee dies; or
- For a self-employed person or owner-employee, the first month in which the employee becomes disabled (within the meaning of
section
72(m)(7)).
Box 4. Federal Income Tax Withheld
Enter any Federal income tax withheld. This withholding under section 3405 is subject to deposit rules and the withholding tax return is
Form 945. Backup withholding does not apply. See Pub. 15-A, Employer's Supplemental Tax Guide, and the Instructions for Form 945
for more withholding information.
Even though you may be using Code 1 in box 7 to designate an early distribution subject to the 10% additional tax specified
in sections 72(q), (t),
or (v), you are not required to withhold that tax.
The amount withheld cannot be more than the sum of the cash and the FMV of property (excluding employer securities) received
in the distribution.
If a distribution consists solely of employer securities and cash ($200 or less) in lieu of fractional shares, no withholding
is required.
To determine your withholding requirements for any designated distribution under section 3405, you must first determine whether
the distribution is
an eligible rollover distribution. See Direct rollovers on page R-2 for a discussion of eligible rollover distributions. If the
distribution is not an eligible rollover distribution, the rules for periodic payments or nonperiodic distributions apply.
For purposes of
withholding, distributions from any IRA are not eligible rollover distributions.
Eligible rollover distribution; 20% withholding.
If an eligible rollover distribution is paid directly to an eligible retirement plan in a direct rollover, do not
withhold Federal income tax. If
any part of an eligible rollover distribution is not a direct rollover, you must withhold 20% of the part that is paid to
the recipient. The recipient
cannot claim exemption from the 20% withholding but may ask to have additional amounts withheld on Form W-4P, Withholding Certificate for
Pension or Annuity Payments. If the recipient is not asking that additional amounts be withheld, Form W-4P is not required
for an eligible rollover
distribution because 20% withholding is mandatory.
Employer securities and plan loan offset amounts that are part of an eligible rollover distribution must be included
in the amount multiplied by
20%. However, the actual amount to be withheld cannot be more than the sum of the cash and the FMV of property (excluding
employer securities and plan
loan offset amounts). For example, if the only part of an eligible rollover distribution that is not a direct rollover is
employer securities or a
plan loan offset amount, no withholding is required. However, any cash that is paid in the distribution must be used to satisfy
the withholding on the
employer securities or plan loan offset amount.
The payer is required to withhold 20% of eligible rollover distributions from a qualified plan's distributed annuity
and on distributions from a
governmental section 457(b) plan.
Any NUA excludable from gross income under section 402(e)(4) is not included in the amount of any eligible rollover
distribution that is subject to
20% withholding.
You are not required to withhold 20% of an eligible rollover distribution that, when aggregated with other eligible
rollover distributions made to
one person during the year, is less than $200.
IRAs.
The 20% withholding does not apply to distributions from any IRA, but withholding does apply to IRAs under the rules
for periodic payments and
nonperiodic distributions. For withholding, assume that the entire amount of an IRA distribution is taxable (except for the
distribution of
contributions under section 408(d)(4), in which only the earnings are taxable, and 408(d)(5)). Generally, Roth IRA distributions
are not subject to
withholding except on the earnings portion of excess contributions distributed under section 408(d)(4).
An IRA recharacterization is not subject to income tax withholding.
Periodic payments.
For periodic payments that are not eligible rollover distributions, withhold on the taxable part as though the periodic
payments were wages, based
on the recipient's Form W-4P. The recipient may request additional withholding on Form W-4P or claim exemption from withholding.
If a recipient does
not submit a Form W-4P, withhold by treating the recipient as married with three withholding allowances. See Circular E, Employer's Tax
Guide (Pub. 15), for wage withholding tables.
Rather than Form W-4P, military retirees should give you Form W-4, Employee's Withholding Allowance Certificate.
Nonperiodic distributions.
Withhold 10% of the taxable part of a nonperiodic distribution that is not an eligible rollover distribution. The
recipient may request additional
withholding on Form W-4P or claim exemption from withholding.
Failure to provide TIN.
For periodic payments and nonperiodic distributions, if a payee fails to furnish his or her correct TIN to you in
the manner required, or if the
IRS notifies you before any distribution that the TIN furnished is incorrect, a payee cannot claim exemption from withholding.
For periodic payments,
withhold as if the payee was single claiming no withholding allowances. For nonperiodic payments, withhold 10%. Backup withholding
does not apply.
Box 5. Employee Contributions or Insurance Premiums
Enter the employee's contributions to a profit-sharing or retirement plan, or insurance premiums that the employee may
recover tax free this year. The entry in box 5 may include any of the following: (a) contributions actually made by the employee over the
years under the retirement or profit-sharing plan that were required to be included in the income of the employee when contributed
(after-tax
contributions), (b) contributions made by the employer but considered to have been contributed by the employee under section 72(f),
(c) the accumulated cost of premiums paid for life insurance protection taxable to the employee in previous years and in the
current year
under Regulations section 1.72-16 (cost of current life insurance protection) (only if the life insurance contract itself
is distributed), and
(d) premiums paid on commercial annuities. Also, until further guidance is issued, report after-tax contributions directly rolled
over to
an IRA. Do not include contributions to any DEC, 401(k) plan, or any other contribution to a retirement plan that was not
an after-tax contribution.
Generally, for qualified plans, tax-sheltered annuities, and nonqualified commercial annuities, enter in box 5 the employee
contributions or
insurance premiums recovered tax free during the year based on the method you used to determine the taxable amount to be entered
in box 2a. If
periodic payments began before 1993, you are not required to, but you are encouraged to, report in box 5.
If you made periodic payments from a qualified plan and the annuity starting date is after November 18, 1996, you must use
the simplified method to
figure the tax-free amount each year. See Annuity starting date in 1998 or later on page R-6.
If a total distribution is made, the total employee contributions or insurance premiums available to be recovered tax free
must be shown only in
box 5. If any previous distributions were made, any amount recovered tax free in prior years must not appear in box 5.
If you are unable to reasonably obtain the data necessary to compute the taxable amount, leave boxes 2a and 5 blank, and check
the first box in box
2b.
For more information, see Rev. Proc. 92-86, 1992-2 C.B. 495 and section 72(d).
For reporting charitable gift annuities, see Charitable gift annuities on page R-6.
Box 6. Net Unrealized Appreciation (NUA) in Employer's Securities
Use this box if a distribution from a qualified plan includes securities of the employer corporation (or a subsidiary or parent
corporation) and
you can compute the NUA in the employer's securities. Enter all the NUA in employer securities if this is a lump-sum distribution.
If this is not a
lump-sum distribution, enter only the NUA in employer securities attributable to employee contributions. See Regulations section
1.402(a)-1(b) for the
determination of the NUA. Also see Notice 89-25, Q/A-1, 1989-1 C.B. 662. Include the NUA in box 1 but not in box 2a. You do
not have to complete this
box for a direct rollover.
Box 7. Distribution Code(s)
Enter an “X” in the IRA/SEP/SIMPLE checkbox if the distribution is from a traditional IRA, SEP IRA, or SIMPLE IRA. It is not
necessary to check the box for a distribution from a Roth IRA or for an IRA recharacterization.
Enter the appropriate code(s) in box 7.
Use the Guide to Distribution Codes on pages R-10 and R-11 to determine the appropriate code(s) to enter in box 7 for any amounts
reported on Form 1099-R. Read the codes carefully and enter them accurately because the IRS uses the codes to help determine
whether the recipient has
properly reported the distribution. If the codes you enter are incorrect, the IRS may improperly propose changes to the recipient's
taxes.
When applicable, enter a numeric and an alpha code. For example, when using Code P for a traditional IRA distribution
under section 408(d)(4), you
must also enter Code 1, if it applies. For a normal distribution from a qualified plan that qualifies for the 10-year tax
option, enter Codes 7 and A.
For a direct rollover to an IRA or a qualified plan for the surviving spouse of a deceased participant, enter Codes 4 and
G.
Only three numeric combinations are permitted on one Form 1099-R: Codes 8 and 1, 8 and 2, or 8 and 4. If two or more
other numeric codes are
applicable, you must file more than one Form 1099-R. For example, if part of a distribution is premature (Code 1) and part
is not (Code 7), file one
Form 1099-R for the part to which Code 1 applies and another Form 1099-R for the part to which Code 7 applies. In addition,
for the distribution of
excess deferrals, excess contributions, or excess aggregate contributions, parts of the distribution may be taxable in 2 or
3 different years. File
separate Forms 1099-R using Code 8, D, or P to indicate the year the amount is taxable.
Even if the employee/taxpayer is 59½ or over, use Code 1 if a series of substantially equal periodic payments was
modified within 5 years of the date of the first payment (within the meaning of section 72(q)(3) or (t)(4)). For example,
Mr. B began receiving
payments that qualified for the exception for part of a series of substantially equal periodic payments under section 72(t)(2)(A)(iv)
when he was 57.
When he was 61, Mr. B substantially modified the payments. Because the payments were modified within 5 years, use Code 1 in
the year the payments were
modified, even though Mr. B is over 59½.
For further guidance on what makes a series of substantially equal periodic payments, see Revenue Ruling 2002-62,
2002-42 I.R.B. 710. This ruling
allows the payments to be calculated under the RMD method if, prior to 2003, the payments satisfied the requirements of section
72(t)(2)(A)(iv). This
ruling replaces Q/A-12 of Notice 89-25 for any series of payments beginning on or after January 1, 2003.
If part of an eligible rollover distribution is paid in a direct rollover and part is not, you must file a separate
Form 1099-R for each part
showing the appropriate code on each form. If part of a distribution is an eligible rollover distribution and part is not
(e.g., a minimum
distribution required by section 401(a)(9)) and the part that is an eligible rollover distribution is directly rolled over,
you must file a separate
Form 1099-R to report each part.
Enter the current actuarial value of an annuity contract that is part of a lump-sum distribution. Do not include this item in boxes 1
and 2a.
To determine the value of an annuity contract, show the value as an amount equal to the current actuarial value of the annuity
contract, reduced by
an amount equal to the excess of the employee's contributions over the cash and other property (not including the annuity
contract) distributed.
If an annuity contract is part of a multiple recipient lump-sum distribution, enter in box 8, along with the current actuarial
value, the
percentage of the total annuity contract each Form 1099-R represents.
Box 9a. Your Percentage of Total Distribution
If this is a total distribution and it is made to more than one person, enter the percentage received by the person whose
name appears on Form 1099-R. You need not complete this box for any IRA distributions or for a direct rollover.
Box 9b. Total Employee Contributions
You are not required to enter the total employee contributions in box 9b. However, because this information may be helpful
to the recipient, you
may choose to report them.
If you choose to report the total employee contributions, do not include any amounts recovered tax free in prior years. For
a total distribution,
report the total employee contributions in box 5 rather than in box 9b.
Boxes 10–15. State and Local Information
These boxes and Copies 1 and 2 are provided for your convenience only and need not be completed for the IRS. Use the state and local
information boxes to report distributions and taxes for up to two states or localities. Keep the information for each state or locality
separated by the broken line. If state or local income tax has been withheld on this distribution, you may enter it in boxes
10 and 13, as
appropriate. In box 11, enter the abbreviated name of the state and the payer's state identification number. The state number
is the payer's
identification number assigned by the individual state. In box 14, enter the name of the locality. In boxes 12 and 15 you
may enter the amount of the
state or local distribution. Copy 1 may be used to provide information to the state or local tax department. Copy 2 may be
used as the recipient's
copy in filing a state or local income tax return.
Specific Instructions for Form 5498
File Form 5498, IRA Contribution Information, with the IRS by May 31, 2004, for each person for whom in 2003 you maintained any
individual retirement arrangement (IRA), including a deemed IRA under section 408(q).
An IRA includes all investments under one IRA plan. It is not necessary to file a Form 5498 for each investment under one
plan. For example, if a
participant has three certificates of deposit (CDs) under one IRA plan, only one Form 5498 is required for all contributions
and the fair market
values (FMVs) of the CDs under the plan. However, if an individual has established more than one IRA plan with the same trustee,
a separate Form 5498
must be filed for each plan.
Contributions.
You must report contributions to any IRA on Form 5498. See the instructions under boxes 1, 2, 3, 4, 8, 9, and 10 on
page R-14. If no reportable
contributions were made for 2003, complete only boxes 5 and 7.
Report contributions to a spousal IRA under section 219(c) on a separate Form 5498 using the name and taxpayer identification
number (TIN) of the
spouse.
For contributions made between January 1 and April 15, 2004, trustees and issuers should obtain the participant's
designation of the year for which
the contributions are made.
Direct rollovers, transfers, and recharacterizations.
You must report the receipt of a direct rollover from a qualified plan (including a governmental section 457(b) plan)
or tax-sheltered annuity to
an IRA. Report a direct rollover in box 2. For information on direct rollovers of eligible rollover distributions, see Direct Rollovers on
page R-2.
If a rollover or trustee-to-trustee transfer is made from a SIMPLE IRA to an IRA that is not a SIMPLE IRA and the
trustee has adequately
substantiated information that the participant has not satisfied the 2-year period specified in section 72(t)(6), report the
amount as a regular
contribution in box 1 even if the amount exceeds $3,000 ($3,500 for individuals 50 or older).
Transfers.
Do not report on Form 5498 a direct trustee-to-trustee transfer from (a) a traditional IRA to another traditional IRA, (b) a
SIMPLE IRA to another SIMPLE IRA, (c) a SEP IRA to another SEP IRA or to a traditional IRA, or (d) a Roth IRA to a Roth IRA. For
reporting purposes, contributions and rollovers do not include these transfers.
Recharacterizations.
You must report each recharacterization of an IRA contribution. If a participant makes a contribution to an IRA (first
IRA) for a year, the
participant may choose to recharacterize the contribution by transferring, in a trustee-to-trustee transfer, any part of the
contribution (plus
earnings) to another IRA (second IRA). The contribution is treated as made to the second IRA (recharacterization). A recharacterization
may be made
with the same trustee or with another trustee. The trustee of the first IRA must report the amount contributed before the
recharacterization as a
contribution on Form 5498 (and the recharacterization as a distribution on Form 1099-R). The trustee of the second IRA must
report the amount received
(FMV) in box 4 on Form 5498 and check the type of IRA box in box 7.
All recharacterized contributions received by an IRA in the same year must be totaled and reported on one Form 5498
in box 4. You may report the
FMV of the account on the same Form 5498 you use to report a recharacterization of an IRA contribution and any other contributions
made to the IRA for
the year.
Catch-up contributions.
Participants, who are age 50 or older by the end of the year, may be eligible to make catch-up IRA contributions or
catch-up elective deferral
contributions. The annual IRA regular contribution limit of $3,000 is increased to $3,500 for participants age 50 or older.
Catch-up elective deferral
contributions reported on Form 5498 may be under a salary reduction SEP (SARSEP) or under a SIMPLE IRA plan. For 2003, up
to $2,000 in catch-up
elective deferral contributions may be made under a SARSEP, and up to $1,000 to a SIMPLE IRA plan. For more information on
catch-up elective deferral
contributions, see Proposed Regulations section 1.414(v)-1.
Include any catch-up amounts when reporting contributions for the year in boxes 1, 8, 9, or 10.
Roth IRA conversions.
You must report the receipt of a conversion from an IRA to a Roth IRA even if the conversion is with the same trustee.
Report the total amount
converted from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA in box 3. Also report a reconversion to a Roth IRA
after a recharacterization
in box 3.
IRA revocation.
If a traditional IRA, Roth IRA, or SIMPLE IRA is revoked during its first 7 days (under Regulations section 1.408-6(d)(4)(ii)),
Form 5498 must be
filed to report any regular, rollover, IRA conversion, SEP, or SIMPLE contributions to a revoked IRA. For information about
reporting a distribution
from a revoked IRA, see IRA Revocation on page R-2.
Total distribution, no contributions.
Generally, if a total distribution was made from an account during the year and no contributions, including rollovers,
recharacterizations, SEP,
SIMPLE, or Roth IRA conversion amounts, were made for that year, you need not file Form 5498 nor furnish the annual statement
to reflect that the FMV
on December 31 was zero.
Distributions.
Report distributions (including recharacterizations) from any IRA on Form 1099-R. For an early distribution of contributions
plus earnings, report
the distribution on Form 1099-R using the applicable code.
Required minimum distributions (RMDs).
An IRA (other than a Roth IRA) owner/participant must begin taking distributions for each calendar year beginning
with the calendar year in which
the owner attains age 70½. The distribution for the 70½ year must be made no later than April 1 of the following
calendar year; RMDs for any other year must be made no later than December 31 of the year.
For each IRA you held as of December 31 of the prior year, if an RMD is required for the year, you must provide a
statement to the IRA owner by
January 31 regarding the RMD using one of two alternative methods described below. You are not required to use the same method
for all IRA owners; you
can use Alternative one for some IRA customers and Alternative two for the rest. Under both methods, the statement must inform
the owner that you are
reporting to the IRS that an RMD is required for the year. The statement can be provided in conjunction with the statement
of the FMV.
If the IRA owner is deceased, and the surviving spouse is the sole beneficiary, special rules apply for RMD reporting. If
the surviving spouse
elects to treat the IRA as the spouse's own, then report with the surviving spouse as the owner. However, if the surviving
spouse does not elect to
treat the IRA as the spouse's own, then you may continue to treat the surviving spouse as a beneficiary. Until further guidance
is issued, no
reporting is required for IRAs of deceased owners (except where the surviving spouse elects to treat the IRA as the spouse's
own, as described above).
Alternative one.
Under this method, include in the statement the amount of the RMD with respect to the IRA for the calendar year and
the date by which the
distribution must be made. The amount may be calculated assuming the sole beneficiary of the IRA is not a spouse more than
10 years younger than the
owner. Use the value of the account as of December 31 of the prior year to compute the amount. See Box 11 on page R-14 for how to report.
Alternative two.
Under this method, the statement informs the owner that a minimum distribution with respect to the IRA is required
for the calendar year and the
date by which such amount must be distributed. You must include an offer to furnish the owner with a calculation of the amount
of the RMD if requested
by the participant.
Electronic filing.
These statements may be furnished electronically using the procedures described in part H of the 2003 General Instructions for
Forms 1099, 1098, 5498 and W-2G.
Reporting to the IRS.
If an RMD is required, check box 11 (see page R-14). For example, box 11 is checked on the 2003 Form 5498 for a 2004
RMD. You are not required to
report to the IRS the amount or the date by which the distribution must be made.
For more details, see Notice 2002-27, 2002-18 I.R.B. 814, and Notice 2003-3, 2003-2 I.R.B. 258. Also see the regulations
under section 401(a)(9)
and Notice 2003-2, 2003-2 I.R.B. 257, for transitional relief related to RMDs from annuity contracts.
Inherited IRAs.
In the year an IRA owner dies, you, as an IRA trustee or issuer, generally must file a Form 5498 and furnish an annual
statement for the decedent
and a Form 5498 and an annual statement for each nonspouse beneficiary. An IRA holder must be able to identify the source
of each IRA he or she holds
for purposes of figuring the taxation of a distribution from an IRA. Thus, the decedent's name must be shown on the beneficiary's
Form 5498 and annual
statement. For example, you may enter “ Brian Willow as beneficiary of Joan Maple” or something similar that signifies that the IRA was once owned
by Joan Maple. You may abbreviate the word “ beneficiary” as, for example, “ bene.”
For a spouse beneficiary, unless the spouse makes the IRA his or her own by making contributions to the account, including
a rollover contribution,
or by not taking distributions required by section 401(a)(9)(B), treat the spouse as a nonspouse beneficiary for reporting
purposes. If the spouse
makes the IRA his or her own, do not report the beneficiary designation on Form 5498 and the annual statement.
Fair market value.
On the decedent's Form 5498 and annual statement, you must enter the FMV of the IRA on the date of death in box 5.
Or you may choose the alternate
reporting method and report the FMV as of the end of the year in which the decedent died. This alternate value will usually
be zero because you will
be reporting the end-of-year valuation on the beneficiary's Form 5498 and annual statement. The same figure should not be
shown on both the
beneficiary's and decedent's forms. If you choose to report using the alternate method, you must inform the executor or administrator
of the
decedent's estate of his or her right to request a date-of-death valuation.
On the beneficiary's Form 5498 and annual statement, the FMV of that beneficiary's share of the IRA as of the end
of the year must be shown in box
5. Every year thereafter that the IRA exists, you must file Form 5498 and furnish an annual statement for each beneficiary
who has not received a
total distribution of his or her share of the IRA showing the FMV at the end of the year and identifying the IRA as described
above.
However, if a beneficiary takes a total distribution of his or her share of the IRA in the year of death, you need
not file a Form 5498 nor furnish
an annual statement for that beneficiary, but you must still file Form 5498 for the decedent.
If you have no knowledge of the death of an IRA owner until after you are required to file Form 5498 (May 31), you
are not required to file a
corrected Form 5498 nor furnish a corrected annual statement. However, you must still provide the date-of-death valuation
in a timely manner to the
executor or administrator upon request.
For more information about the reporting requirements for inherited IRAs, see Rev. Proc. 89-52, 1989-2 C.B. 632.
Special reporting for U.S. Armed Forces in designated combat zones.
An individual who is serving in or in support of the Armed Forces in a designated combat zone or qualified hazardous
duty area has an additional
period after the normal contribution due date of April 15 to make IRA contributions for a prior year. The period is the time
the individual was in the
designated zone or area plus at least 180 days. The individual must designate the IRA contribution for a prior year to claim
it as a deduction on the
income tax return.
If a qualifying combat zone individual makes a contribution to an IRA after April 15th and designates the contribution
for a prior year, you must
report the type of contribution (Box 7) and the amount on Form 5498. Report the amount either for (1) the year for which the contribution
was made or (2) a subsequent year.
- If you report the contribution for the year it is made, no special reporting is required. Include the contribution in box
1 of an original
Form 5498 or of a corrected Form 5498 if an original was previously filed.
- If you report the contribution on Form 5498 in a subsequent year, you must include the year for which the contribution was
made, the amount
of the contribution, and one of the following indicators:
- Use “JG” (Joint Guard) or “AF” (Allied Force) for the Kosovo area.
- Use “JE” (Joint Endeavor) for the Persian Gulf area.
- Use “EF” (Enduring Freedom) for Afghanistan, Uzbekistan, Kyrgyzstan, Pakistan, Tajikistan, and Jordan.
- Use “IF” (Iraqi Freedom) for the Arabian Peninsula Areas (the Persian Gulf, the Red Sea, the Gulf of Oman, the portion of the Arabian
Sea that lies north of 10 degrees north latitude and west of 68 degrees east longitude, the Gulf of Aden, and the total land
areas of Iraq, Kuwait,
Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates and the airspace above such locations).
Under 2 above, enter the information in the blank box to the left of box 10. Do not enter the amount in box 1 (or box 10).
For example, enter a $2,000 IRA contribution designated for Joint Guard for the tax year 1998 as “ JG 1998 2000” in the blank box.
See Pub. 3, Armed Forces' Tax Guide, for a list of the locations within the designated combat zones and qualified hazardous duty areas.
Magnetic media/electronic filers.
You may request an automatic waiver from filing combat zone Forms 5498 by submitting Form 8508, Request for Waiver From Filing
Information Returns Magnetically. Once you have received the waiver, you may report all Forms 5498 for combat zone participants
on paper.
Alternatively, you may report contributions made by the normal contribution due date magnetically or electronically and report
the contributions made
after the normal contribution due date on paper. You may also report prior year contributions by combat zone participants
on a corrected Form 5498
magnetically, electronically, or on paper.
See Magnetic Media/Electronic Reporting in the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G for information on how to
request a waiver on Form 8508.
Corrected Form 5498.
If you filed a Form 5498 with the IRS and later discover that there is an error on it, you must correct it as soon
as possible. See part
I in the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G. For example, if you reported contributions as rollover
contributions in box 2, and you later discover that part of the contribution was not eligible to be rolled over and was, therefore,
a regular
contribution that should have been reported in box 1, you must file a corrected Form 5498.
Statements to participants.
If you are required to file Form 5498, you must provide a statement to the participant. By February 2, 2004, you must
provide participants with a
statement of the December 31, 2003, value of the participant's account and RMD, if applicable. Trustees of SIMPLE IRAs also
must provide a statement
of the account activity by February 2. Contribution information for all other types of IRAs must be provided by May 31, 2004.
You are not required to
provide information to the IRS or to participants as to whether a contribution is deductible or nondeductible. In addition,
the participant is not
required to tell you whether a contribution is deductible or nondeductible.
If you furnished a statement of the FMV of the account to the participant by February 2, 2004, and no reportable contributions,
including
rollovers, recharacterizations, or Roth IRA conversions, were made for 2003, you need not furnish another statement (or Form
5498) to the participant
to report zero contributions. However, you must file Form 5498 with the IRS by May 31, 2004, to report the December 31, 2003
FMV of the account. This
rule also applies to beneficiary accounts under the inherited IRA rules on this page.
For more information about the requirement to furnish statements to participants, see part H in the 2003 General Instructions for Forms
1099, 1098, 5498, and W-2G.
If you do not furnish another statement to the participant because no reportable contributions were made for the year,
the statement of the FMV of
the account must contain a legend designating which information is being furnished to the Internal Revenue Service.
Box 1. IRA Contributions (Other Than Amounts in Boxes 2–4, and 8–10)
Enter contributions to a traditional IRA made in 2003 and through April 15, 2004, designated for 2003.
Report gross contributions, including the amount allocable to the cost of life insurance (see Box 6) and including any excess
contributions, even if the excess contributions were withdrawn. If an excess contribution is treated as a contribution in
a subsequent year, do not
report it on Form 5498 for the subsequent year. It has already been reported as a contribution on Form 5498 for the year it
was actually contributed.
Also include employee contributions to an IRA under a SEP plan. These are contributions made by the employee, not by the employer, that
are treated as regular IRA contributions subject to the 100% of compensation and $3,000 ($3,500 for individuals 50 or older)
limits of section 219. Do
not include employer SEP contributions or SARSEP contributions under section 408(k)(6). Instead, include them in box 8.
Also, do not include in box 1 contributions to a SIMPLE IRA (report them in box 9) and a Roth IRA (report them in box 10). In addition,
do not include in box 1 rollovers and recharacterizations (report rollovers in box 2 and recharacterizations in box 4), or
a Roth IRA conversion
amount (report in box 3).
Box 2. Rollover Contributions
Enter any rollover contributions to any IRA received by you during 2003. Include a direct rollover from a qualified plan (including a
governmental section 457(b) plan) or tax-sheltered annuity to an IRA. For the rollover of property, enter the FMV of the property
on the date you
receive it. This value may be different from the value of the property on the date it was distributed to the participant.
Box 3. Roth IRA Conversion Amount
Enter the amount converted or reconverted from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA during 2003. Do not
include a rollover from
one Roth IRA to another Roth IRA. Include a rollover in box 2.
Box 4. Recharacterized Contributions
Enter any amounts recharacterized plus earnings from one type of IRA to another.
Box 5. Fair Market Value of Account
Enter the FMV of the account on December 31. For inherited IRAs, see Inherited IRAs on page R-13.
Box 6. Life Insurance Cost Included in Box 1
For endowment contracts only, enter the amount included in box 1 allocable to the cost of life insurance.
If you did not enter an amount in box 1, 3, 8, 9, or 10, even if you entered an amount in box 2 or 4, you must check the appropriate
box. If you entered an amount in box 1, 3, 8, 9, or 10, you may, but you do not have to, check the appropriate box.
IRA.
Check “ IRA” if you are filing Form 5498 to report information about a traditional IRA account.
SEP.
Check “ SEP” if you are filing Form 5498 to report information about a SEP IRA. A SEP is a written arrangement (plan) under section 408(k)
established by an employer to make contributions toward his or her own (if a self-employed individual) and employees' retirement.
The contributions
are made to the IRAs of the participants in the plan. If you do not know whether the account is a SEP IRA, check the “ IRA” box.
SIMPLE.
Check “ SIMPLE” if you are filing Form 5498 to report information about a SIMPLE IRA account. A SIMPLE IRA is an individual retirement plan
that can receive contributions under a written salary reduction arrangement. It may be established by an employer (including
a self-employed person)
with 100 or fewer employees. Do not check this box for a SIMPLE 401(k) plan. See section 408(p).
Roth IRA.
Check “ Roth IRA” if you are filing Form 5498 to report information about a Roth IRA account.
Enter employer contributions made to a SEP IRA (including salary deferrals under a SARSEP) during 2003 including contributions made in
2003 for 2002, but not including contributions made in 2004 for 2003. Do not enter employee contributions to an IRA under a SEP plan.
Report any employee contributions to an IRA under a SEP plan in box 1. Also include in box 8 SEP contributions made by a self-employed
person to his or her own account.
Box 9. SIMPLE Contributions
Enter any contributions made to a SIMPLE IRA during 2003. Do not include contributions to a SIMPLE 401(k) plan.
Box 10. Roth IRA Contributions
Enter any contributions made to a Roth IRA in 2003 and through April 15, 2004, designated for 2003. However, report Roth IRA
conversion amounts in
box 3.
Box 11. Check if RMD in 2004
Check the box if the participant must take a required minimum distribution (RMD) in 2004. On Form 5498, or in a separate statement,
report the
information required by Alternative one or Alternative two (see page R-12). To determine the RMD, see the regulations under
sections 401(a)(9) and 408(a)(6) and (b)(3). If you use Form 5498 to report the additional information under Alternative one,
enter the amount and
date in the blank box to the left of Box 10 on the form.
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