Sifting Through Your Retirement Tax Forms

Retirement tax forms must be completed to report income to the federal government. The complete list of retirement tax forms is fairly extensive, but retired taxpayers will only need to fill out the ones that pertain to their particular retirement plans. As a taxpayer, if you fail to file those forms, or file incorrect forms, you will have to pay penalty fees. This is why every retired taxpayer must figure out which tax forms they are required to fill out as soon as possible.

Form 1099-R

This is the most basic form that every retiree must complete, regardless of the type of retirement plan. Like other 1099 forms, this form is used to report the taxpayer's income. In this case, it's the overall  annual income from each retirement plan the taxpayer is enrolled in. In other words, if the taxpayer has more then one retirement plan, they will get a separate 1099-R form for each retirement plan. 1099-R is also used to report revocations, rollovers and transfers in any of the plans in question.  

The entity that manages the taxpayer's retirement plan, which is a trustee or a plan administrator, fills out the form, files it with the IRS and sends a copy of it to the taxpayer. The taxpayer will need this information in order to fill out the income tax form (IRS Form 1040) and all of the tax forms described below.

Form 5329

This form is used to report any additional taxes on IRAs and other qualified retirement plans. The taxpayer must pay those taxes if any of the following occurs:

  • Early distribution-the taxpayer received any distributions in his Roth IRAs before turning 59 years and nine months old, triggering a 10 percent early distribution penalty. If the taxpayer received early distributions from other retirement plans, they must only pay extra taxes if their Form 1099-R doesn't have distribution code 1 in Box 7.
  • Taxable distributions-the taxpayer received taxable distributions from Coverdell ESAs, or another qualified tuition program QTPs.
  • Minimum required distribution-the taxpayer does not receive a minimum required distribution from his or her retirement plan, triggering an excess accumulation penalty.

The taxpayer will also need to fill out Form 5329 if they are exempt from an early distribution penalty. However, the 1099-R form does not indicate that.

Form 4972

This form will need to be filled out if the taxpayer receives a lump-sum payment from any of their retirement account. A lump-sum payment occurs when the taxpayer receives the entire balance of their retirement account in one single payment. This form does not have to filled out if any part of that payment was rolled over into another retirement plan.  

Form 8606

The retired taxpayers must fill out this form if they get any income from any IRAs and their IRA contributions weren't tax-deductible. If that's the case, then the money they receive from their IRAs is taxable. The taxpayers will need to use Form 8606 to determine just how much they will have to pay. The taxpayers will also need to fill this out if they converted their traditional IRAs, SEP IRA, or SIMPLE IRA into Roth IRA. The conversion is usually taxed.

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