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Investor Insights Blog|Tax Time Terms: Forms 1099 and 5498 Explained

Managing Your Account

Tax Time Terms: Forms 1099 and 5498 Explained

During tax time, you might have heard mention of various IRS forms, such as Form 1099-R or 5498, relative to your self-directed account(s). Here’s a quick explanation of each, as well as events that would trigger generation of these forms.

Form 1099-R

This form reports any distributions totaling $10 or more from a retirement account, and any federal or state withholding that has been remitted to the IRS on behalf of the account holder. It also reflects what kind of distribution was taken, for instance, a premature distribution, normal distribution, or a return of excess. Forms are mailed by January 31.

Form 5498

This form reports contributions, rollovers, the Fair Market Value (FMV) of your account, and Required Minimum Distribution details.

This form is only generated if there is reportable activity like a contribution or rollover. If the account had no reportable activity, the FMV is reported on your year-end statement and to the IRS. Qualified plan account types do not generate a 5498. Forms are mailed by May 31.

[Related: Is Tax Form 5498 Important to You?]

Rollover contributions

This is when an account holder takes a distribution from an IRA (reportable on a 1099-R form) and rolls the money back into an IRA (which can be at another custodian) within the IRS-regulated 60-day timeframe (reportable on a 5498 form). The distribution is offset by the rollover contribution.

The rollover must be applied within 60 days from the date of the distribution and only one 60-day rollover is permissible within any 12-month period.

[Related: How Often Can You Roll Over Your IRA? 60 Day Rollover Rule Explained]

More information can be found on the IRS website. Your tax professional can also help answer any questions about these forms.

1

Can I roll over a 401(k) account into a self-directed IRA?

Yes. A self-directed IRA gives you the ability to diversify your portfolio with additional investments that are permitted by the IRS, in a tax-free or tax-deferred environment.

2

Is there a limit to the number of rollovers I can do a year?

You can complete one rollover per 12-month period. The 12-month period begins on the date you receive the funds/assets, not the date the funds/assets were sent to you from your IRA custodian.

If a second distribution is made during the 12-month period it will not be eligible for rollover. This means the distribution is a taxable event and is subject to the 10-percent penalty tax, if applicable. In addition, those funds cannot be validly deposited into your account as a rollover contribution. They will be treated as a regular contribution for the current year, which may result in an excess contribution.


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