What Is IRS Form 5498 and How Does It Work?


Triston Martin

Nov 10, 2023

Internal Revenue Service Form 5498, known as "IRA Contribution Informations," provides information on how much money you donated to your Individual Retirement Account (IRA) for tax purposes. Contributions to individual retirement accounts (IRAs) are tax-deductible for most taxpayers.

Until the funds are withdrawn, the earnings are tax-free. Your plan administrator must submit Form 5498 to the IRS as proof that you made these contributions. The IRS gets a copy of this form every year. You will also receive a copy from your plan administrator, which you should save for your records.

What Is Form 5498?

IRA contributions and rollovers are included on IRS Form 5498, which serves as an informative document. It's also stated:

• Recharacterizations

• Conversions

• End-of-year valuations in the market

Included are donations that can be deducted and those that cannot be removed. Due to the tax-free nature of the dividends, contributions to a Roth IRA do not qualify for a tax deduction, but they are still reported on Form 5498.

Who Uses Form 5498?

If you've made conventional IRA contributions, you may use Form 5498 to figure out your tax deduction, but you may not be able to deduct the whole amount shown on the form. IRA contribution caps are imposed by the Internal Revenue Service (IRS). For those under 50, these restrictions are $6,000 per year; for those over 50, they are $7,000 per year. For tax years 2021 and 2022, the cap remains the same.

IRA contribution limitations are subject to alteration regularly. Assume you had a good year and contributed $3,000 more to your IRA. Your deduction is still restricted to $6,000 if $9,000 is stated in Box 1 on Form 5498. A maximum of $7,000 is available to anyone over 50. To add insult to injury, you'll have to pay an excise tax of six percent for every year the $3,000 you donated sits in your account until you remove it.

You or your spouse's ability to claim the total amount of the tax deduction is determined by your filing status, income, and whether or not you are both enrolled in an employer-sponsored retirement plan. There is no need to file your copy of Form 5498, as your plan administrator has already sent it to the Internal Revenue Service on your behalf (IRS). Instead, save it for your records.

Types of 5498 Form

Form 5498

IRA donations are reported on Form 5498, which includes contributions made to SEP-IRA, Roth IRA, inherited IRA, and SIMPLE IRA.

Form 5498-SA

You can save pre-tax money for eligible medical costs in a health savings account (HSA).

Who Can File IRA Contribution Information Form 5498?

Contributions to IRAs are listed on Form 5498 for the tax year indicated (if no contributions are made, then there is no entry). Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, and deemed IRAs are all subject to reporting. Deemed IRAs are qualified retirement plans (QRPs) that are tacked on to an employer's qualified retirement savings plan in the form of employee contributions.

Form 5498 is used by IRA trustees and custodians to report distributions to the Internal Revenue Service and individual taxpayers. It must be sent by June 1 of the following year. As long as you retain a copy of this form in your tax records, you don't need to include it when you submit your taxes.

How to Understand Form 5498: IRA Contribution Information

Information about the trustee (name, address, and federal identification number) is included on Form 5498, along with the same information for the participant, the owner of the Individual Retirement Account. The kind of IRA is specified with a checkbox in Box 7: IRA contributions from all types of IRAs for the year are combined and recorded in Box 1 of the form.

Box 10 for Roth IRAs, Box 8 for SEP IRAs, and Box 9 for SIMPLE IRAs are separated. It doesn't matter if the deemed IRA is traditional or Roth; it's considered the same as any other IRA. Box 2 summarises contributions that were rolled over. There is no limit on the amount of money that can be transferred from one IRA to another in 12 months.

The IRS is likely to send a notice to a person who claims a deduction that exceeds the amount recorded on Form 5498. Additional taxes, interest, and fines will be demanded in the letter for any tax underpayment caused by a deduction more significant than the amount indicated on the form.

Instructions for Completing Form 5498

Form 5498 must be filed with the IRS by May 31 of each year for institutions and trustees (January 31 for FMV and RMD; and April 30 for Form 5498-ESA). This information may appear to be contradictory. Personal tax returns are generally due on April 15.

However, contributions for the prior tax year that ended on December 31 are usually allowed until Tax Day. Your plan's administrator will take a little longer to add these contributions to your account.

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