Form 1099-R is a tax form issued by the Internal Revenue Service (IRS) to report distributions from pensions, annuities, retirement plans, IRA accounts, and similar sources. This form is completed by the payer of these distributions and provided to the recipient (taxpayer) who received the income.
Here's why you should complete Form 1099-R and how it impacts your taxes:
1. Retirement Distributions: If you've received distributions from a retirement account, such as a traditional IRA, Roth IRA, 401(k), or a pension plan, you are required to report these distributions on your tax return. Form 1099-R provides important information regarding the amount of distribution you received during the year.
2. Taxable vs. Non-Taxable Distributions: Form 1099-R not only reports the total distribution amount but also specifies the taxable and non-taxable portions. Certain distributions, like Roth IRA contributions or after-tax contributions to a retirement plan, may be non-taxable. However, most distributions are subject to income tax unless they meet specific criteria for exemption or qualify for a special treatment.
3. Reporting Early Withdrawals: If you withdrew money from your retirement account before reaching the age of 59 ½, you may face an early withdrawal penalty. Form 1099-R will indicate if any taxes or penalties were withheld from your distribution. Moreover, it helps the IRS ensure that you accurately report the taxable portion of the early withdrawal and calculate any penalties owed.
4. Tax Withholding: If you had any federal income taxes withheld from your retirement distributions, it will be reported on Form 1099-R. This aids in determining your total tax liability and helps avoid underpayment penalties or discover potential refundable amounts.
5. Filing Requirements: The information from Form 1099-R is to be reported on your federal income tax return. Depending on your other income and tax situation, you may need to file additional forms or schedules along with your regular income tax return (e.g., Form 1040 or Form 1040A).
It is important to review and understand the information provided on Form 1099-R. You should keep this form for your records, and consult a tax professional if you have any questions or concerns about completing your tax return accurately.