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What is Form 1099-R?

IRS Link to Form — Found Here

When it comes to reporting distributions from various retirement plans and accounts, Form 1099-R plays a crucial role. This Internal Revenue Service (IRS) tax form serves as an information return, documenting distributions from annuities, profit-sharing plans, retirement plans, insurance contracts, and more. In this article, we will delve into the details of Form 1099-R, its purpose, who should file it, and the relevant information it contains.

Understanding Form 1099-R

Form 1099-R is a specific type of 1099 form used by the IRS to report distributions from retirement plans and accounts. It helps individuals accurately report passive income and distributions from annuities, profit-sharing plans, retirement plans, individual retirement accounts (IRAs), insurance contracts, and pensions.

As an information return, Form 1099-R is part of the larger 1099 series, which includes various forms used to report different types of income received, excluding salary. These forms cover income sources such as independent contractor earnings, interest, dividends, and government payments.

Who Should File Form 1099-R?

According to the IRS, any entity that manages the following accounts is required to complete a Form 1099-R for each distribution exceeding $10:

  1. Profit-sharing or retirement plans
  2. Individual Retirement Accounts (IRAs)
  3. Annuities, pensions, insurance contracts, or survivor income benefit plans
  4. Permanent and total disability payments under life insurance contracts
  5. Charitable gift annuities

Additionally, rollover transfers from one retirement account to another are also recorded on Form 1099-R. Direct rollovers are indicated by distribution codes G or H in box 7.

It's important to note that loans borrowed against retirement account savings are not recorded on Form 1099-R, as they are not considered distributions. However, if regular loan payments are missed, the missed payments may be treated as early distributions and reported on Form 1099-R with the distribution code L. Such distributions are taxable income and may incur early withdrawal penalties.

Information Included on Form 1099-R

In addition to the recipient's identifying information, such as name, date of birth, and personal data, Form 1099-R includes details about the distributed funds. This information encompasses the account owner's contributions, unrealized value of securities, capital gains, and any taxes due on the distribution. Recipients use this information when filing their annual taxes.

Filing Form 1099-R

The plan issuer provides Form 1099-R, ensuring that copies are sent to the IRS, the recipient of the distribution, and the recipient's state, city, or local tax department. Similar to other IRS forms, Form 1099-R includes the payer's name, address, telephone number, and taxpayer identification number (TIN). Recipients' names, addresses, and taxpayer identification numbers (typically their Social Security Numbers) are also required.

The form contains various fields to be completed, such as the gross distribution paid during the tax year, taxable distribution amount, federal income tax withheld at source, contributions made to the investment or insurance premiums paid, and distribution codes representing the type of distributions made to the account holder. Distribution codes are recorded in Box 7 of the form, and an accompanying table in the instructions provides the code explanations.

Other Relevant Forms

Form 1099-R is part of a broader range of 1099 forms known as information returns. These forms serve the purpose of preventing taxpayers from underreporting their income. While there are approximately 16 types of information returns, most individuals only encounter a few of them. Some other common Form 1099s include:

  1. Form 1099-INT: Used to report interest income.
  2. Form 1099-DIV: Used to report dividends and distributions.
  3. Form 1099-MISC: Used to report miscellaneous income, particularly for independent contractors and self-employed individuals.
  4. Form 1099-K: Used to report payment card and third-party network transactions.

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Disclaimers and Limitations

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