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1099-R Retirement tax form
1099-R Retirement tax form

IRS Form 1099-R: Retirement Tax Form Basics: What You Should Know

Savings for retirement may not be your first priority, but it can take your entire career to make sure that your retirement savings work for you. With IRAs, 401 (k)s and other tax-favored or employer-sponsored retirement plans, your retirement savings can be boosted dramatically with these tax-deferred growth programs. When the time finally comes to withdrawal the money from your retirement account, you will need to understand the Form 1099-R: Retirement Tax Form. The information below for the Form 1099-R  will help you understand the tax implications of these withdrawals.

Will I receive 1099-R this year?

If financial institutions that hold tax-favored retirement accounts and IRAs made distributions of $10 or more in a year, you must file Form 1099-R. The provision also applies to annuities, pensions, insurance contracts, and profit related plans.

In addition to the programs above, you will also get the Form 1099-R ( if you do a direct rollover of your retirement savings plan to another eligible tax-favored account.

How to use the information on Form 1099-R?

The form includes two important boxes. Box 1 shows the total money that financial institution distributed from your retirement savings account. Box 2a shows how much of that distribution will be taxable. On your tax return, you will report the Box1 figure, while the number that gets added in your gross income figure is the Box 2a figure.

If the taxpayer can’t determine how much of distribution will be taxable, then Box 2a will be left blank, and Box 2b will be check marked next to the field “taxable amount not determined.”

In case, if you had withheld from your retirement savings account on which tax has been deducted, you will need to avoid paying the tax twice.

Box 3 includes figures that will be treated capital gains. The amount that will be shown in Box 4 indicates how much was withheld from going for federal taxes. Box 5 shows contributions (if any) such as Roth contributions that are eligible for tax-free withdrawals. If your retirement plan holds your company stock, the gains of which are eligible for special treatment will be covered under box 6. Box 12 indicates (any) state tax withholding, while box 15 indicates withholding for any local tax applicable.

What to keep in mind?

Remember, the IRS will receive a copy of your 1099-R directly from the financial institution who is handling your retirement account. It is important to make sure to report your distributions accurately because any discrepancy could trigger an audit by the IRS.

Bottom line:

Form 1099-R is an essential part of understanding your retirement account distributions. Therefore, making sure that your retirement savings withdrawals get taxed properly will protect you in your golden years.

United Financial Counselor strives to educate our clients regarding retirement savings and provide other financial counseling services. Should you have any questions related to your finances, please visit our website

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