Form 1099-R is an informational form used by financial institutions to report distributions of more than $10 to account holders from a variety of sources including:
- Pensions and annuities
- Profit sharing and retirement plans
- IRA’s
- Insurance contracts
Most of these distributions are from some type of retirement plan or fund, and there are differences in the tax treatment of these plans. For many retirees, distributions are mandatory after a certain age, and these amounts will need to be reported on Form 1040 as taxable income. The amounts listed on 1099-R are for inclusion on one’s income tax form, and the form is submitted to the IRS with a copy to the taxpayer.
The reason they are taxable is that most amounts placed in an IRA or retirement plan are deductible from income for that year, and will now be subject to tax upon withdrawal in the current tax year. There are exceptions such as withdrawals from a qualified Roth IRA, so it is important to get sound tax advice on the tax ability of distributions.
Form 1099-R resembles other 1099 forms on the left hand side with boxes for the payer, recipient, addresses and tax identification numbers. There is also a space for the recipient’s account number.
On the right hand side the important and most frequently used boxes include
Box 1 contains the Gross Distribution before withholding or taxes, and Box 2 lists the amount that is taxable. If the distribution was a rollover to another account then this amount would be zero.
Box 4 contains the amount of federal income tax withheld by the payer.
Box 7 lists the distribution code for the type of distribution, such as normal, early, death, disability and Roth payments. There is also a check box for any distributions that are IRA/SEP or SIMPLE plans.
Boxes 12-17 are for reporting state and local income taxes.
It is important to check the accuracy of the distribution amounts on form 1099-R since they may be taxable for the recipient.
