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What Is IRS Form 5498?

Updated for Tax Year 2014


OVERVIEW

If you made contributions to an IRA in the preceding tax year, you can expect to receive IRS Form 5498.


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You can expect to receive IRS Form 5498 if you made contributions to an IRA (Individual Retirement Account) in the preceding tax year. The "custodian" of your IRA, typically the bank or other institution that manages your account, will mail a copy of this form to both you and the Internal Revenue Service. If you have an IRA but made no contributions for the year, the custodian generally won't send you a Form 5498.

Purpose of Form 5498

Form 5498 reports your total annual contributions to an IRA account and identifies the type of retirement account you have, such as a traditional IRA, Roth IRA, SEP IRA or SIMPLE IRA. Form 5498 will also report amounts that you roll over or transfer from other types of retirement accounts into this IRA. When you claim a deduction for your IRA contributions, you should reference the amounts on the Form 5498.

IRA withdrawals and distributions

Form 5498 tells you the fair market value of all the investments in your IRA account. If your IRA is not a Roth IRA, the IRS requires you to begin withdrawing money from the account starting with the calendar year you turn 70 1/2. When the custodian of your account prepares your Form 5498, it must report the amount of your required withdrawals or distributions.

If you fail to withdraw a sufficient amount of funds from your IRA, the IRS penalizes you with a 50 percent tax on that distribution amount. The percentage of all funds in the account that you are obligated to withdraw, known as the "required minimum distribution" or RMD, increases as you get older.

Increasing your IRA deduction

Plan custodians must distribute 5498s to participants and the IRS no later than May 31 of each calendar year -- a full six weeks after the income tax filing deadline of April 15. This allows you to continue making contributions to your IRA up until April 15 and have them apply to the previous tax year. In some cases, this extra time can help increase your tax deduction.

Similar forms

You may also receive a similar form, the Form 5498-SA, if you have a health savings account, commonly known as an HSA. Form 5498-SA reports your annual contributions to these tax-free accounts that you use to pay for medical expenses. Contributions to similar accounts, such as Archer Medical Savings Accounts and Medicare Advantage MSAs will also warrant a Form 5498-SA. This form must be mailed to participants and the IRS by May 31.

Receiving Form 1099-R

If you took a distribution of more than $10 from your IRA during the year, your plan custodian will also send you a Form 1099-R. This form reports how much you withdrew, how much of the distribution was taxable and how much, if any, was withheld for federal and state taxes. Form 1099-R must be mailed to plan participants by January 31 and to the IRS by February 28. If the custodian files with the IRS electronically, the form is due by March 31.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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