Irs form 1099 reporting: 1099-r reporting

FORM 1099-R Reporting – The Fundamentals File Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for each person who received a distribution of $10 or more from the following: Profit-sharing or retirement plans IRAs Annuities Pensions Insurance contracts Survivor income benefit plans Permanent and total disability payments Other similar types of payments

FORM 1099-R Reporting – The Fundamentals Unless it's a distribution from a Roth IRA, report distributions from a retirement plan in Boxes 1 and 2a Report any reportable distributions from commercial annuities Report distributions to participants of a nonqualified deferred compensation, according to I.R.C. § 409A Report distributions of I.R.C. § 404(k) dividends from an Employee Stock Ownership Plan (ESOP) to individuals who are not participants or the participants' beneficiaries Report I.R.C. § 404(k) dividends paid directly from the corporation to participants or the participants' beneficiaries on Form 1099-DIV If cash or capital gain property is donated in exchange for a charitable gift annuity, report distributions from the charitable gift annuity

FORM 1099-R Reporting – The Fundamentals Report payments of matured or redeemed annuity, endowment, and life insurance contracts Need to file only one Form 1099-R for distributions from all investments under one plan, paid in one year, to one recipient, UNLESS you have to enter different codes in Box 7 (discussed in more detail later) In other words, you do not have to file a separate Form 1099-R for each distribution under the plan, assuming there has been more than one For distributions from a Roth IRA, report the gross distribution in Box 1, but generally leave Box 2a blank. Then check the "Taxable amount not determined" box in Box 2b Enter Code J

FORM 1099-R Reporting – The Fundamentals DO NOT REPORT Payment subject to withholding of Social Security and Medicare taxes Amounts totally exempt from tax Examples: workers compensation payments or Department of Veteran Affairs payments Qualified Health Savings Account (HSA) funding distributions

FORM 1099-R Reporting – The Fundamentals Box 1 Report in Box 1 Gross Distributions, including: Direct Rollovers (discussed in more detail in a few more slides) The value of U.S. Savings Bonds distributed from a plan Amounts distributed from a qualified retirement plan for which the recipient elects to pay health insurance premiums under a cafeteria plan or that are paid directly to reimburse medical expenses incurred by the recipient Amounts distributed to beneficiaries of deceased employees Enter any death benefit payments NOT MADE as part of a pension, profit-sharing or retirement plan Also enter these amounts in Box 2a Enter Code 4 in Box 7 in these instances

FORM 1099-R Reporting – The Fundamentals Box 1 B. Spector Vikings Supporters Co. 233 Minneapolis Drive Minneapolis, MN 55402 J. Doe 111 Go Packers Drive Milwaukee, WI 53201

FORM 1099-R Reporting – The Fundamentals Box 2a Enter in Box 2a the taxable amount of the distribution (i.e., amounts that can be included in the individuals' gross income for that year) If unable to reasonably obtain the data needed to compute taxable amount of distribution, leave the box blank Do not enter amounts that are excludible from income or tax-deferred, which are reportable in Boxes 5, 6, and 8 Enter in Box 2a the amount of excess deferrals, excess contributions, or excess aggregate contributions Enter in Box 2a the cost of current life insurance protection

FORM 1099-R Reporting – The Fundamentals Box 2a If a distribution is a loss, do not enter a negative amount in Box 2a Example: if an employee's 401(k) account consists solely of stock, and a distribution is made, but the value of the distribution is less than the employee's remaining after-tax contributions, enter the value of the stock in Box 1, BUT leave Box 2a blank FYI – enter the employee's after-tax contributions in Box 5

FORM 1099-R Direct Rollover of an Eligible Rollover Distribution Report a direct rollover of an eligible rollover distribution Direct rollover is direct payment from a qualified plan An eligible rollover distribution is any distribution of all or any portion of a balance in one account to another account under a qualified plan Report a direct rollover in Box 1 and a "0" in Box 2a Enter Code G in box 7 unless the rollover is a direct rollover from a designated Roth account to a Roth IRA Note: Prepare the form using the name and social security number (SSN) of the person for whose benefit the funds were rolled over (generally the participant), not those of the trustee or administrator of the plan to which the funds were rolled

FORM 1099-R Direct Rollover of an Eligible Rollover Distribution If any portion of a distribution from a designated Roth account that is not includible in gross income is to be rolled over into a retirement account under another plan, the rollover MUST be accomplished by a Direct Rollover of an Eligible Rollover Distribution For qualified plans, the plan administrator must provide to each recipient of an eligible rollover distribution, an explanation using either a written paper document or an electronic medium The explanation must be provided no more than 180 days and no fewer than 30 days, before making an eligible rollover distribution or before the annuity starting date.

FORM 1099-R Direct Rollover of an Eligible Rollover Distribution An eligible rollover is not one of the following: A Required Minimum Distribution (RMD) Elective deferrals Corrective distributions of excess deferrals Corrective distributions of excess contributions under a qualified cash or deferred arrangement Loans treated as deemed distributions

FORM 1099-R Box 4 – What You Need To Know Federal Income Tax Withholding Special rules for withholding I.R.C. § 3405(b) – For non-periodic distributions from a retirement plan, must withhold 10% I.R.C. § 3405(c) – Eligible Rollover Distributions are subject to a 20% withholding tax So what does this mean?

FORM 1099-R Box 4 – What You Need To Know Federal Income Tax Withholding The IRS provides a test to figure out whether FITW is required and what amount to withhold: First, determine whether the distribution is an eligible rollover (discussed above)? If yes, then 20%; If no, next step If not an eligible rollover, is it a non-periodic distribution (i.e., a distribution outside of a time the participant is supposed to receive one)? If yes, then 10%; If no, next step The distribution is a periodic distribution (when participant is supposed to receive one), withhold at normal FITW rate for that employee's wages. Percentage to withhold depends on the withholding procedure of the company, wage bracket, etc. Note: the eligible rollover withholding rules do not apply to IRA distributions

FORM 1099-R Box 7 – Codes Rules The IRS uses codes to determine whether a distribution has been properly reported Rules: Enter a maximum of two alpha/numeric codes in Box 7 Only three combinations are permitted: Codes 8 and 1 (2011 and 59.5), 8 and 2 (2011 and early distribution), and Codes 8 and 4 (2011 and death) *We explain these codes in the next slide If two or more codes (other than the combos above), then need to file more than one 1099-R Example: if part of a distribution is premature (Code 1) and part is not (Code 7), then file two Form 1099-Rs Use Codes 8 (2011) or P (2012) to indicate the year in which the amount is taxable

FORM 1099-R Box 7 – Codes Codes About Which You Need To Know Code 1: When the employee/taxpayer has not reached age 59.5 and no other exception applies *Certain exceptions exist for distributions that qualify for Code 2 (too many to list here - please refer to the instructions); Code 3 exceptions are for distributions due to disability; and Code 4 exceptions are for distributions due to death Code 7: Normal distributions Code B: Designated Roth Account distributions Code G: Direct rollover and rollover contributions

FORM 1099-R Box 7 – Codes Codes About Which You Need To Know Code 5: When reporting a prohibited transaction Code 8: When reporting excess contributions plus earnings/excess deferrals taxable in 2012 Code F: When reporting a Charitable Gift Annuity Code P: When reporting excess contributions plus earnings/excess deferrals taxable in 2011 Code U: When reporting dividend distributions from an ESOP under I.R.C. § 404(k)

FORM 1099-R Prohibited Transactions If an IRA owner or retirement plan sponsor engages in a prohibited transaction with respect to a retirement plan, the assets are treated as distributed on the first day of the tax year in which the prohibited transaction occurs. Report in Boxes 1 and 2a, and enter Code 5 in Box 7 (Code 5 also indicates to the IRS that the retirement plan is terminated) Prohibited transactions include the following: Sale, exchange, or leasing, of any property between the plan and a party-in-interest (e.g., essentially anyone having an interest related to the plan, like a fiduciary or employer) Lending money or an extension of credit to a party-in-interest Furnishing of goods, services, or facilities between the plan and a party-in-interest

FORM 1099-R Prohibited Transactions Transfer of any assets to, by, or for the benefit of a party-in-interest A plan fiduciary deals assets for their own benefit A plan fiduciary becomes involved in a transaction with someone whose interests are adverse to the interests of the plan or its participants A plan fiduciary receives any consideration (anything of value) for assets in their own personal account

FORM 1099-R Corrective Distributions Corrective distributions are distributions of excess deferrals, excess contributions, and excess aggregate contributions under 401(k) or other deferred compensation plans Corrective distributions must include earnings through the end of the year in which the excess arose Report the amount in Box 1 and 2a, entering Code 8 (if the excess occurred in 2012), Code P (if the excess occurred in 2011) and add Code B if the excess was for a Designated Roth Account distribution

FORM 1099-R Distributions from a Roth IRA For distributions from a Roth IRA, report the gross distribution in Box 1, but generally leave Box 2a blank. Then check the "Taxable amount not determined" box in Box 2b Enter: Code J (early distribution) Code Q (qualified distribution) The participant meets the five-year requirement (five years from first contribution) The participant reaches 59.5 years old The participant died or The participant is disabled Code T (when do not know if the 5-year holding period has been met, but the other elements are present)