Special IRS Forms You May Need For Tax Time


As we near tax-filing season, a familiar anxiety may begin to take hold. Even if we delegate our tax-filing process to others, we cannot always escape the gnawing concern that we’ve forgotten something. And if you prepare your tax return yourself, well, “good luck and Godspeed.” When it comes to reporting IRA transactions, most of the process is straightforward. But some transactions may be worth revisiting to help ensure that you are properly reporting them to avoid IRS scrutiny—or worse.  

Reporting IRA Distributions

A central tenet of retirement savings is to contribute generously and to avoid taking assets out of your plan. But distributions of all sorts are quite common. For example, you may have taken a distribution that you have rolled over into the same (or different) eligible retirement plan. Or perhaps you took a distribution to pay for an emergency or other important expense (e.g., higher education). In any event, you should receive an IRS Form 1099-R, which reports that distribution, by the beginning of February.

IRA Rollovers: Reported . . . But Not Taxed

Even if you’ve properly rolled over an IRA distribution, you’ll have to report in on your federal tax return. Taxpayers are normally permitted one rollover per 12-month period, which must generally be recontributed to an eligible retirement plan within 60 days after the distribution date. To report an IRA distribution that you roll over, enter the rollover amount on line 4a (“IRA distributions”) of the 1040 and write “Rollover” next to line 4b (“Taxable amount”). It’s as simple as that. But if you haven’t rolled over your entire IRA distributions for 2023, you will have to report any taxable amount on line 4b.

Other Tips on Reporting Distributions

Form 1099-R is like IRS Form W-2, except that instead of reporting “wages, tips, other compensation,” the 1099-R reports distributions from retirement plans. But like the W-2, it contains important information about the nature of the distribution and about whether you have withheld any assets as a prepayment of tax. Box 4 shows how much, if any, that has been withheld when the distribution occurred. You will want to make sure that you claim this credit against your tax obligation.

Box 7 of this form shows important information about your distribution based on the code that appears. For instance, a code “Q” reflects a qualified distribution from a Roth IRA; a code “1” indicates an early distribution from a Traditional IRA, which may be subject to an additional tax. 

Certain Distributions May Require a Form 5329 Filing

IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, is most frequently used for these transactions:

  • Distributions before age 59½.
  • Excess IRA contributions that are not timely corrected.
  • Failure to timely distribute a required minimum distribution (RMD).

Normally, if you take a Traditional IRA distribution before the day you reach age 59½, you will be subject to a 10% additional tax. If this is the only penalty that you must pay, you will not have to file Form 5329. Instead, you may simply list this penalty as an “additional tax” on line 8 of Schedule 2 of your 1040. But if you claim an exception to the penalty, you may need to file Form 5329. If you needed to take an RMD in 2023 and failed to withdraw it, you must file Form 5329 to pay the penalty or to request a penalty waiver (if there was a reasonable cause for the failure). 

Other Transactions May Require Filing Form 8606

This form accounts for nondeductible assets (or “basis”) that you contribute to or withdraw from your IRAs. You must file Form 8606: Nondeductible IRAs, if any of these apply for the 2023 tax year.

  • You made nondeductible contributions to a Traditional IRA, including repaying a qualified disaster, a qualified reservist, or a qualified birth or adoption distribution.
  • You took a distribution from a Traditional, SEP, or SIMPLE IRA and there is after-tax basis in any such IRAs. (This includes distributions from an inherited IRA.)
  • You converted Traditional, SEP, or SIMPLE IRA assets to any Roth IRA.
  • You took a nonqualified distribution from any Roth IRA.

Filing—and retaining—these additional IRS forms will help you submit an accurate return this year and may help you avoid future headaches. For example, if you make a nondeductible contribution to your Traditional IRA but fail to file Form 8606, a $50 penalty applies, plus you may end up paying tax twice on the contribution: once when you make it and again upon distribution.

Happy Filing

Nothing in this article can take all the pain out of tax-filing season. But understanding how IRA reporting works—and how certain forms that you file with your return can provide critically important information to the IRS—can make the process a bit more tolerable. Of course, you should rely on sound tax advice whenever you have a question on your information returns or on how to file properly. But you can always reach out to us for questions on your self-directed IRAs.