Whenever you take a distribution from a retirement that exceeds a value of $10, you’ll get Form 1099-R, Distributions From Pensions, Annuities, Retirement, or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
The form is an information return and reports your passive income and distributions from retirement plans such as annuities, profit-sharing plans, retirement plans, individual retirement accounts, insurance contracts, or pensions. Loans, rollovers, and transfers from one retirement account to another are also reported on Form 1099-R.
You’re required to file form 1099-R whether a distribution is a taxable or non-taxable event.
How to navigate Form 1099-R
Form 1099-R shows you and the IRS the gross amount of the distribution taken, the taxable amount, tax withholding, and a why you received the distribution.
Form 1099-R has many fillable boxes. Here’s a quick overview of what they all mean:
- Box 1. Gross distribution from the plan
- Box 2a. Taxable portion of the distribution (if known by the payer)
- Box 2b. Checkboxes indicating whether or not the payer has calculated the taxable portion of the distribution and whether it was a total or partial distribution of the plan balance
- Box 3. Portion of the distribution allocated to capital gains
- Box 4. Federal income tax withheld from the distribution (if any)
- Box 5. Portion of the distribution allocated to employee contributions, designated Roth contributions or insurance premiums
- Box 6. Net unrealized appreciation in employer’s securities
- Box 7. A distribution code designed to specify the type of distribution received. This could help the taxpayer determine whether their distribution is taxable
- Box 8. Other
- Box 9a. Your percentage of total distribution
- Box 9b. Total employee contributions
- Box 10. Amount allocable to IRR within five years
- Box 11. First year of designated Roth contributions
- Box 12. FATCA filing requirement checkbox
- Box 13. Date of payment
- Box 14. Amount of state tax withheld
- Box 15. Payer’s state identification number
- Box 16. Amount of state distribution
- Box 17. Amount of local tax withheld
- Box 18. Name of locality (if applicable)
- Box 19. Amount of local distribution
Box 7 lists the reason for the distribution, and is classified by different codes. For a complete list of Box 7 distribution codes, click here.
When will I receive Form 1099-R?
If you’ve taken any distributions from the following accounts that exceed $10 in value, you will need to file Form 1099-R:
- Profit-sharing or retirement plans
- Insurance contracts
- Survivor income benefit plans
- Life insurance contracts that provide payments for total and permanent disability
- Charitable gift annuities
As mentioned earlier, rollovers, loans, and transfers in a retirement plan also count as distributions and you should be issued a Form 1099-R for each action.
Also read: Important Forms for Solo 401k Owners
How to file Form 1099-R
You’re required to file a 1099-R when you take a distribution from your retirement plan of $10 or more. Your plan custodian completes Form 1099-R and issues three copies: One to recipient of the distribution, one to the IRS, and one for any applicable state, city, or local tax department.
It’s perfectly normal to receive multiple 1099-R forms if you’ve taken distributions from several accounts during the tax year.
You need to take all of your received 1099-R forms, total the amounts in Box 1 from all forms, and then report the information when you file your individual tax return using Form 1040. The types of distributions that you took from your retirement plans will determine how much in taxes you’ll need to pay. For example, early distribution from retirement plans, before the age of 59½, or before the 5-year period for Roth accounts, could result in a 10% early distribution fee in addition to ordinary income taxes.
When is Form 1099-R due?
Form 1099-R must be issued to plan participants and beneficiaries by January 31 or each year. Recipients are required to file by February 28th if filing by mail, or by April 1st if filing online.