Is Tax Form 5498 Important to You?

By Elsie Dudukovich0 Comments
 
If you have a retirement account, it may be in your best interest to know about Form 5498. Here’s a summary of the form and information about whether you might receive one this year.  

What is Tax Form 5498?
Tax Form 5498 is the form used by IRA custodians to report to the IRS contribution information for the tax year, the Fair Market Value as of the end of the calendar year, and if the account holder must take a Required Minimum Distribution (RMD).  IRS publication “2019 Instructions for Forms 1099-R and 5498,” describes in detail how Form 5498 and tax form 1099 are used. 

Form 5498 can come in three different forms depending on the type of plan:
  • Form 5498, IRA Contribution reports information about individual retirement accounts such as traditional IRAs, Roth IRAs, SEP IRAs and SIMPLE IRA plans.
  • Form 5498-SA reports information about Health Savings Accounts (HSAs).
  • Form 5498-ESA reports information about Coverdell Education Savings Accounts (CESAs).

When Should You Expect to Receive One?
Custodians file Form 5498 with the IRS by May 31 because IRA contributions can be made up to the tax filing deadline for the prior year. Individuals who must take a Required Minimum Distribution (RMD) may receive Form 5498 from their custodian after January 31, however this filing is not required and your Custodian may communicate your requirement to complete an RMD through a separate mailing.    

You will only receive a copy of Form 5498 by May 31 if you made a contribution for the current tax year. If you have not made a contribution, rollover or conversion your Q4 statement is considered to be a Substitute Form 5498. 
 
Why Would You Receive a Form 5498?
Tax form 5498 reports contribution information for a variety of plans: traditional IRAs, Roth IRAs, SEP IRAs and SIMPLE IRAs as well as Health Savings Accounts (HSAs) and Coverdell Education Savings Accounts (CESAs). If you hold any or all of these plans, you could receive a 5498 tax form for each plan that had activity reported on Form 5498.  If you hold multiple IRAs with multiple custodians, you would receive a Form 5498 from each custodian for each plan held at that custodian if activity was reported on Form 5498.

Illustrative Example 1:
A person holds a traditional IRA and a Roth IRA at Custodian A.  They do not have any other accounts at other custodians.  They contributed to both accounts for the tax filing year.  This person would receive two Form 5498s from Custodian A: One Form 5498 to report the contributions and Fair Market Value/HTV of their traditional IRA and a second Form 5498 to report the contributions and Fair Market Value/HTV of their Roth IRA.

Illustrative Example 2:
A person holds a traditional IRA and a Roth IRA at Custodian A and a traditional IRA at Custodian B.  They contributed to all three accounts for the tax filing year.  This person would receive three Form 5498s. Custodian A issues two 5498 forms: One Form 5498 to report the contributions and Fair Market Value/HTV of their traditional IRA and a second Form 5498 to report the contributions and Fair Market Value/HTV of their Roth IRA. Custodian B would issue one Form 5498 to report the contributions and Fair Market Value/HTV of the traditional IRA held at this custodian.

In addition to personal contributions, rollover contributions, Roth conversions, and recharacterized contributions are other types of money movements reported as contribution information on Form 5498.  Each money movement has a dedicated box on Form 5498 to detail the total amount associated with that event for that account, for that custodian.

Transferring funds from an IRA held at one custodian directly to another IRA of the same tax environment held at another custodian is not a reportable event and therefore does not generate Form 5498.  A 60-day rollover is considered a reportable event and would generate a Form 5498.  
A Roth conversion is the movement of funds from a tax-deferred retirement account (Traditional IRA, SEP IRA, or SIMPLE IRA) to the tax-free environment of a Roth IRA. This money movement is a reportable event.

As with all financial and tax concerns, it is in your best interest to research to determine if a course of action is fully understood and appropriate for your goals.  The IRS publications are one resource you could consult.  IRS Publication 590A provides information on contributions and money movements such as rollovers and Roth conversions for traditional IRAs and Roth IRAs.  IRS Publication 560 concerns SEP IRAs, SIMPLE IRAs, and qualified plans.