What Exactly Is Form 5498 for the IRS

What Exactly Is Form 5498 for the IRS

The Internal Revenue Service (IRS) Form 5498, “IRA Contribution Information,” is a statement that shows how much money you put into your individual retirement account (IRA) during the previous tax year.

What exactly is this Form 5498?

The Internal Revenue Service (IRS) Form 5498 is an informational form that reports not only your IRA contributions to the IRS but also any rollovers you may have made. Moreover, it reports that:

  • Recharacterizations
  • Conversions
  • Year-end fair market values are

Contributions that are tax-deductible as well as those that are not are included.

Because withdrawals from a Roth IRA are not subject to taxation, contributions to this type of retirement account do not qualify for a tax deduction. However, these contributions must still be recorded on Form 5498.

Who Makes Use of Form 5498?

You may figure out how much of a tax deduction you are eligible for based on the qualifying IRA contributions you’ve made by using Form 5498, but keep in mind that you might not be able to deduct the entire amount that is mentioned for conventional IRA contributions.

IRA contribution caps are determined by the Internal Revenue Service (IRS). If you are under the age of 50, the restriction is $6,000 every year, but if you are 50 or older, the limit is $7,000. For the tax years 2021 and 2022, the threshold remains unchanged. Every so often, the maximum amounts that can be put into an IRA are looked at and changed so that they keep up with rising prices.

Let’s say you had a prosperous year and were able to contribute an additional $3,000 to your individual retirement account (IRA). Even if you report $9,000 in Box 1 of Form 5498, the maximum deduction that you can take is still $6,000. If you are 50 years old or older, the maximum you can receive is $7,000.

You can’t get a tax credit for the extra $3,000 you gave, and you’ll also have to pay an excise tax of 6% on the amount of the extra contribution for each year it stays in your account before you can take it out.

The limits were $5,500 for individuals aged 50 and older and $5,500 for those aged 50 and under for the tax years 2015 through 2018. In 2022, they were identical to the limits that had been in place for the years 2020 and 2021.

Whether or not you can take the maximum. The deduction depends on how you file your taxes, how much money you make, and whether or not you or your spouse have a retirement plan at work.

You are exempt from the requirement to submit a copy of Form 5498 to the Internal Revenue Service (IRS) provided your plan administrator has already done so. Instead, you should save a copy for your records.

Types of Form 5498

Form What It’s Used For
Form 5498 IRA contributions
Form 5498-ESA Coverdell ESA Plan contributions
Form 5498-SA Health Savings Accounts

Form 5498

Form 5498 lists all contributions to individual retirement accounts (IRAs), like SEP-IRAs, Roth IRAs, inherited IRAs, and SIMPLE IRAs.

Form 5498-ESA

This form is used to report contributions made to Coverdell Education Savings Account plans. Coverdell ESA plans are a type of custodial account that is established to pay for the educational needs of a beneficiary.

Form 5498-SA

This one is for health savings accounts, which are also called HSAs. HSAs let people save money before taxes to pay for certain medical bills.

What to Do in the Event That You Have Not Received Form 5498

If you haven’t received a Form 5498 reporting your contributions yet, you should get in touch with the administrator of your plan.

You are able to make contributions to an IRA plan for the tax year that has just ended until Tax Day, which falls on April 15 every year. The paperwork can be issued by your administrator up until the 31st of May.

If you haven’t received it on time, check with the administrator to see whether they have the right address for you to send the form. You can also check to see if you really did make contributions during the tax year in question.

Instructions on How to Read Form 5498

On Form 5498, there are a number of different boxes that are used to report information pertaining to contributions made to a variety of plans. The most prevalent ones are as follows:

  • Box 1: Traditional individual retirement account (IRA) contributions you made in 2021 and up until the contribution deadline in 2022.
  • Rollovers and conversions from another plan into an IRA are recorded in Boxes 2 and 3, respectively.
  • Box 7: This identifies the sort of plan you have.
  • Contributions made to SEP-IRAs during the tax year in which they were received, including any employer contributions, go in Box 8.
  • Contributions were made to SIMPLE IRAs during the tax year in which they were received, including those made by the employer (Box 9).
  • Contributions you make to Roth IRAs during 2021 and up until the contribution deadline in 2022 will be reported in Box 10.
  • Box 11 will tell you whether or not you are required to start taking required minimum distributions (RMDs) in 2022.
  • Box 15: Fair market value

In most cases, direct trustee-to-trustee transfers that take place between the same categories of plans do not have to be reported on Form 5498.

In the case of Roth conversions (which are reported in box 3), or if you have reached the age at which you are required to begin taking required minimum distributions, or RMDs, then the fair market value (FMV) comes into play (box 11). If you do not attain the age of 70 and a half before January 1, 2020, you will be considered to be 72 years old.

Due to the wide spread of the coronavirus in 2020, the CARES Act stopped retirees from having to take required minimum distributions (RMDs) from their retirement savings.

If you haven’t already submitted your tax return, you should review it carefully to ensure that you haven’t claimed a deduction for more money than what’s shown on Form 5498. If you believe that the numbers that are listed on the form might be incorrect, you should contact the administrator of the plan. You can also talk to a tax expert to get help with any problems you may be having.

Instructions for Completing and Submitting Form 5498

Form 5498 must typically be submitted to the Internal Revenue Service (IRS) by the trustees and institutions by the 31st of May of each tax year (January 31 for FMV and RMD; and April 30 for Form 5498-ESA).

At the time that you make your donations, you should clearly state the year that you want them to be applied toward.

It’s possible that this information goes against common sense. After all, the normal date for filing individual tax returns is the 15th of April, but you typically have until Tax Day to make your contributions for the tax year prior to the current one, which ended on December 31. The person in charge of your plan needs a little bit more time to add these contributions.

Key Takeaways

  • Form 5498 is an informational statement from the Internal Revenue Service. It tells you and the IRS how much you put into an individual retirement account (IRA) during the previous tax year.
  • IRA contributions are eligible for a tax break under certain parameters. The information that you provide on Form 5498 is used to provide evidence to the IRS that you contributed money.
  • You are not required to include the form with your tax return. However, you will need the information that is stated on the form in order to calculate the amount of the tax deduction that you are eligible to take for your donations.

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