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What Is IRS Form 5498?
Posted On September 11, 2020
IRS Form 5498, “IRA Contribution Information,” is a statement that details how much you’ve contributed to your IRA during the tax year. Your plan administrator is obligated to send this form to the IRS annually and to provide you with a copy as well.
Taxpayers can claim tax deductions for contributions made to their IRA plans, and the earnings grow tax-free until such time as the money is withdrawn. But this generates IRS reporting issues so the IRS can substantiate that you did indeed make these contributions—thus the need for Form 5498.
What Is Form 5498?
IRS Form 5498 is an informational form that reports not only your IRA contributions to the IRS, but any rollovers you might have made as well. It also reports recharacterizations, conversions, and year-end fair market values. It includes both deductible and non-deductible contributions.
Contributions to a Roth IRA don’t qualify for a tax deduction, but distributions from this type of account are therefore tax-free. They’re still reported on Form 5498.
Who Uses Form 5498?
Form 5498 is provided to you so you can calculate your tax deduction for qualifying IRA contributions you’ve made. You’re not necessarily entitled to deduct the entire amounts that might appear in the various boxes on the form, however, because the IRS sets contribution limits for IRAs.
IRA contribution limits are $6,000 a year if you’re under age 50. This increases to $7,000 if you’re age 50 or older. Contributions over these amounts are taxable at the time you make them—you get no deduction for them.1
Assuming you were having a flush year so you threw a little extra into your IRA, and if $9,000 is reported in Box 1 of Form 5498, your deduction is still limited to $6,000 unless you’re age 50 or older, in which case it’s limited to $7,000. These limitations are subject to change periodically to keep up with inflation. They were $500 less from 2015 through 2018. The $6,000 and $7,000 limits apply in 2020.1
The IRS also imposes limitations if you or your spouse are also covered by a retirement plan at work.
You don’t have to file Form 5498 with your tax return. It’s for informational purposes only.
Reach out to your plan administrator if you don’t receive a Form 5498 reporting your contributions by the end of April. You have until tax filing day to make plan contributions for the tax year just past, so your administrator has until April 15 to issue the form.2
You might also want to make sure that the administrator has your correct address and that you did indeed make contributions in that tax year.
How to Read Form 5498
Different boxes on Form 5498 report contributions to various types of plans and a variety of other information. The most important include:
Box 1: Contributions to traditional IRAs
Boxes 2 and 3: Rollovers and conversations from another plan into an IRA
Box 7: Identifies your plan type
Box 8: Contributions to SEP-IRAs for the year in which they’re received, including employer contributions
Box 9: Contributions to SIMPLE IRAs for the year in which they’re received, including employer contributions
Box 10: Contributions to Roth IRAs
Box 11: Reports whether you must begin taking required minimum distributions (RMDs) in the next calendar year
Box 15a: Fair market value
Rollovers and conversions aren’t tax deductible, but they’re nonetheless reportable on Form 5498.
Direct trustee-to-trustee transfers made between the same types of plans aren’t reported on Form 5498. It won’t appear anywhere on the form if you make a transfer from one SIMPLE IRA to another, and the same rule applies if you transfer from a traditional IRA to a Roth IRA.
An exception exists if your administrator must report fair market value (FMV). Fair market value comes into play with Roth conversions, or if you’ve reached the age at which you must begin taking RMDs. This is age 72 if you didn’t reach age 70 ½ on or before December 31, 2019. Otherwise, it’s age 70½.3
The CARES Act has waived required minimum distributions (RMDs) from retirement accounts for 2020 due to the coronavirus pandemic.4
The FMV of certain assets as of Dec. 31 must be included because this value contributes to amounts that can be converted. It’s also included in calculations as to how much in the way of RMDs you must take.
Doublecheck your tax return if you haven’t filed it yet to make sure you haven’t claimed a deduction for more than what’s reported on Form 5498. Reach out to your plan administrator if you think the figures on the form might be wrong, or check with a tax professional.
Requirements for Filing Form 5498
Institutions and trustees are normally required to file Form 5498 with the IRS by May 31 of the tax year. This might seem counterintuitive—after all, personal tax returns are traditionally due by April 15—but you have until that April 15 deadline to make contributions for the previous tax year that ended on December 31. Your plan administrator needs a little more time to include these contributions.
It’s possible that your plan will send you two Forms 5498: one to report fair market value on December 31 of the prior year, due to you by January 31, and another to report contributions made from through April 15, due May 31.5
You should specify the year you intend your contributions to count toward at the time you make them.
An Important Update
IRS Publication 590A includes some valuable worksheets to help you calculate your allowable deductions based on numerous factors, such as that you’re covered by a retirement plan at work. Some of the text in Worksheet 2-1 on page 40 was revised by the IRS on Feb. 26, 2020. Be sure to use a version published after that date for accurate calculations of 2020 contributions.6
Seek the help of a tax professional if you’re at all unsure about the deduction you’re claiming
IRS Form 5498 is an informational statement that reports to you and to the IRS the amount of any IRA contributions you made during the previous tax year.
IRA contributions are tax-deductible up to certain limits. The IRS uses the information on Form 5498 substantiate that you did indeed make contributions.
It’s not necessary to file the form with your tax return, but you’ll need the information reported there to calculate how much of a tax deduction you’re entitled to take for your contributions.