Form 5498 isn’t as well-known as the W-2 or 1099, but it’s essential for your tax record-keeping if you have an individual retirement account (IRA). This form arrives after tax day, generally in May or June, which leaves many people wondering what to do with it.
Form 5498 reports any IRA contributions you made throughout the tax year, but it’s not something you file with your tax return. Read on for more about what Form 5498 is, who receives it, who files it and what to do when you get one.
Keep in mind:
Think of Form 5498 as the opposite of a Form 1099-R: Form 5498 reports what went into your retirement account, whereas a 1099-R reports what came out, aka distributions.
What is Form 5498?
Form 5498, also known as “IRA Contribution Information,” is an IRS form that tracks your IRA contributions and activity for the year. It’s not a form you file yourself; instead, it’s prepared by your IRA provider, such as your bank or brokerage. That company prepares the form and sends a copy to you and a copy to the IRS. The form tells the IRS how much you’ve contributed to your retirement accounts, including traditional, Roth, SEP and SIMPLE IRAs.
Form 5498 also tracks rollovers, conversions and special contributions, like catch-up contributions for people over 50. It also reports recharacterizations, which is when, after you make a contribution, you then change the account it goes to. (See the IRS instructions for Form 5498.)
While Form 5498 gives a snapshot of your IRA activity, it doesn’t report whether your contributions are tax-deductible. Along with amounts and types of contributions made, it shows the fair market value of your IRA at the end of the year. It may also indicate whether a required minimum distribution (RMD) is necessary.
When your IRA custodian files a Form 5498 with the IRS, you’ll receive a copy. Again, it’s not something you need to file with your tax return, just keep it for your personal records.
Keep in mind:
If you’re over 73, the IRS requires you to take out a minimum amount from your IRA each year (known as a required minimum distribution or RMD). The 5498 form may highlight if you need to take an RMD for the upcoming year, helping you stay on track and avoid penalties.
Who receives Form 5498?
If you contributed to an IRA, you’ll receive Form 5498, which includes contributions to:
- Traditional IRAs
- Roth IRAs
- SEP IRAs
- SIMPLE IRAs
You’ll also receive Form 5498 if you rolled over funds from another retirement plan into an IRA. If you have multiple IRAs at different institutions, you’ll receive a separate form for each account. If you didn’t make any contributions or rollovers, you may not receive a Form 5498.
Need an advisor?
Need expert guidance when it comes to managing your investments?
Bankrate’s AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals.
When can you expect to receive Form 5498?
Form 5498 has a later deadline for issuance compared to other tax forms. Financial institutions must file it with the IRS by May 31. As a result, you’ll typically receive your copy by late May or early June.
Many providers send Form 5498 electronically, so check your email or spam folder. You can also log into your account or contact your provider if you don’t see your form by mid-June.
Who has to file Form 5498?
You don’t file Form 5498 yourself — the responsibility lies with your IRA trustee or custodian. This is typically the financial institution (like a bank, brokerage firm or credit union) that holds your IRA.
By the time you receive your copy, the IRS will have already received it from your IRA provider. You don’t need to attach Form 5498 to your tax return. It’s purely informational and confirms that your IRA contributions are recorded.
What should you do with Form 5498?
Once you receive Form 5498, here’s what you should do:
- Review the details: Check that the contribution amounts on the form match your records. For example, if you contributed $7,000 to your traditional IRA, Box 1 on the form should reflect that amount. If you notice any discrepancies or errors, contact your IRA provider to have them corrected. It’s important to make sure the IRS has the right information.
- Keep it for your records: Don’t discard the form. Store it with your other tax and retirement account records. Even though you don’t need to file it, the form can prove your IRA contributions if the IRS asks. Experts suggest keeping such documents for at least three years.
- Note the year-end information: To help with your financial planning, note the fair market value of your IRA as of Dec. 31. If you’re at the age where RMDs apply (currently, age 73 and above), the form will say whether an RMD is required for the following year. If you have to take an RMD, act before the deadline to avoid penalties.
- Address any excess contributions: If you contributed more than the annual limit ($7,000, or $8,000 if you’re 50 or older in 2024) a quick correction helps you avoid penalties. Contact your IRA custodian to remove the excess contributions and any associated earnings. If you don’t correct it by the tax deadline, the IRS may impose a 6 percent excise tax on excess contributions.
Bottom line
Form 5498 gives a summary of your IRA activity for the year. While you don’t need to file it with your tax return, it’s smart to review it for accuracy and keep it on hand. Knowing what it reports helps you stay on top of your retirement savings and in line with IRS rules.
Read the full article here
