IRA custodians must track all IRA contributions made throughout the year and generate IRS Form 5498, IRA Contribution Information, for each IRA to report contribution activity and the fair market value for the entire IRA and for certain types of alternative investments held within the IRA.
Form 5498 is an important record of your IRA contributions that you should retain with your financial files. It is not a form that is filed with your tax return each year or that you must present to your tax preparer. Typically, your IRA custodian will send a copy to you and to the IRS by May 31 each year to report activity for the prior year. Due to the 2020 Coronavirus pandemic, the deadline for filing tax returns has been extended to July 15, 2020; consequently, the custodial reporting deadline has also been extended to July 15, 2020.
In many cases, you will have already filed your tax return. The IRS receives Forms 5498 by the custodial reporting deadline and may use these forms to crosscheck against the IRA contributions reported on individual federal tax returns. For example, if you claimed on your tax return that an IRA distribution was not taxable because you rolled it over to another IRA within 60 days, the IRS should have a Form 5498 for the IRA receiving the rollover reporting the amount that you rolled over.
When you receive your Form 5498 from your IRA custodian, do two things:
1. Carefully review the information and dollar amounts to make sure they match what you entered on your tax return. Discrepancies could trigger an audit. Contact your IRA custodian if you have a question or believe there is an error on your Form 5498. If there is an error, your IRA custodian will issue a corrected Form to both you and the IRS.
2. Store your Form 5498 with your financial files to maintain a record of your IRA contributions.
Information You’ll Find on Form 5498
A lot of information about your IRA and your contributions can be gleaned from Form 5498. Here’s a list of the information that may be reported on a 2019 Form 5498 and where you’ll find it on the form.
|2019 IRS Form 5498|
|Box 1||Shows Traditional IRA contributions for 2019. These contributions may be deductible on your Form 1040 or 1040-SR. However, if you or your spouse was an active participant in an employer’s pension plan, these contributions may not be deductible. This box does not include amounts in boxes 2–4, 8–10, 13a, and 14a.|
|Box 2||Shows any rollover, including a direct rollover to a Traditional IRA or Roth IRA, or a qualified rollover contribution (including a military death gratuity or SGLI payment) to a Roth IRA you made in 2019. It does not show any amounts you converted from your traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA. They are shown in box 3. It does not show any late rollover contributions. They are shown in box 13a. See Form 1040 or 1040-SR instructions for information on how to report rollovers. If you have ever made any nondeductible contributions to your traditional IRA or SEP IRA and you did not roll over the total distribution, use Form 8606 to figure the taxable amount. If the property was rolled over, see Pub. 590-A. For a qualified rollover to a Roth IRA, also see Pub. 590-A.|
|Box 3||Shows the amount converted from a Traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA in 2019. Use Form 8606 to figure the taxable amount.|
|Box 4||Shows amounts recharacterized from transferring any part of the contribution (plus earnings) from one type of IRA to another. See Pub. 590-A.|
|Box 5||Shows the FMV of all investments in your account as of December 31, 2019. However, if a decedent’s name is shown, the amount reported may be the FMV on the date of death. If the FMV shown is zero for a decedent, the executor or administrator of the estate may request a date-of-death value from the financial institution.|
|Box 6||Shows for endowment contracts only the amount allocable to the cost of life insurance. Subtract this amount from your allowable IRA contribution included in box 1 to compute your IRA deduction.|
|Box 7||May show the kind of IRA reported on this Form 5498|
|Box 8||Amount of SEP contributions received in 2019|
|Box 9||Amount of SIMPLE IRA contributions received in 2019|
|Box 10||Amount of regular and catch-up contributions made to a Roth IRA for 2019. Do not deduct on your income tax return.|
|Box 11||Check box if there is an RMD due for 2020. An RMD may be required even if the box is not checked. See Pub. 590-B for details. Note: The CARES Act has waived RMDs for 2020.|
|Boxes 12a and 12b||RMD amount and due date if the IRA custodian uses Form 5498 to satisfy the RMD notice requirement (due by January 31). Note: The CARES Act has waived RMDs for 2020.|
|Box 13a||Amount of postponed contributions made by a military servicemember or someone in a designated disaster area; or the amount of a late rollover contribution made during 2019, including late rollovers that are self-certified by the IRA owner, qualified plan loan offsets, or related to affected taxpayers in a federally declared disaster area. This amount is not reported in box 1 or 2.|
|Box 13b||Shows the year to which the postponed contribution in box 13a was credited. If a late rollover contribution is shown in box 13a, this box will be blank.|
|Box 13c||For participants who made a postponed contribution due to an extension of the contribution due date because of a federally designated disaster, shows the code FD. For participants who served in designated combat zones, qualified hazardous duty areas, or direct support areas, shows the appropriate code. The codes are: EO13239 for Afghanistan and associated direct support areas, EO12744 for the Arabian Peninsula areas, PL115-97 for the Sinai Peninsula of Egypt, and EO13119 (or PL106-21) for the Yugoslavia operations areas. For additional information, including a list of locations within the designated combat zones, qualified hazardous duty areas, and direct support areas, see Pub. 3. For updates to the list of locations, go to www.irs.gov/Newsroom/Combat-Zones. For a participant who makes a rollover of a qualified plan loan offset, shows the code PO. For a participant who has used the self-certification procedure for a late rollover contribution, shows the code SC.|
|Box 14a||Shows the amount of any repayment of a qualified reservist distribution, a qualified disaster distribution, or a qualified birth or adoption distribution. See Pub. 590-A for reporting repayments.|
|Box 14b||Shows the code QR for the repayment of a qualified reservist distribution, code DD for repayment of a qualified disaster distribution, or code BA for repayment of a qualified birth or adoption distribution.|
|Box 15a||Shows the FMV of the investments in the IRA that are specified in the categories identified in box 15b.|
|Box 15b||The following codes show the type(s) of investments held in your account for which the FMV is required to be reported in box 15a.
A—Stock or other ownership interest in a corporation that is not readily tradable on an established securities market.
B—Short- or long-term debt obligation that is not traded on an established securities market.
C—Ownership interest in a limited liability company or similar entity (unless the interest is traded on an established securities market).
E—Ownership interest in a partnership, trust, or similar entity (unless the interest is traded on an established securities market).
F—Option contract or similar product that is not offered for trade on an established option exchange.
G—Other asset that does not have a readily available FMV.
H—More than two types of assets (listed in A through G) are held in this IRA.
Transfers directly from IRA custodian to IRA custodian are not reported on Form 5498. Form 5498 also does not report contributions and rollovers made to employer-sponsored retirement plans.
Why You Might Receive Your Form 5498 Early
IRA custodians may use Form 5498 to satisfy the fair market value statement or the required minimum distribution (RMD) notice requirement – both of which are due to IRA owners by January 31. If you receive your Form 5498 early in the year, no further action is necessary on your part unless you believe there is an error on your Form, or you make an IRA contribution for 2019 between January 1, 2020, and July 15, 2020. In this case, your IRA custodian will issue an updated Form 5498.
Contact STRATA Trust for Assistance
If you have any questions about your Form 5498, please contact us at Service@StrataTrust.com.
Disclaimer: The information provided herein does not, and is not intended to, constitute personalized financial or legal advice. The contents of the article are for general informational purposes only and should not be relied or acted upon without specific professional legal or financial advice, based upon an individual’s situation.