The amount you hold in a retirement account directly contributes to your tax liability calculation each year. As an IRA account holder, you will be required to disclose your contributions, withdrawals and account modifications each year. Thankfully, your IRA administrator will supply you with the majority of the forms you need in order to file appropriately. However, if you are uncertain which forms you need, ask your account administrator about the following forms and whether you will be required to complete the forms.

Reporting Contributions - Form 1040 or 1040A

When reporting your contribution, it is important to note the distinction between a Traditional IRA and a Roth IRA. A traditional IRA uses tax deductible contributions in the current tax year. This means you will report the money you added to the account and deduct it today. With a Roth IRA, you pay taxes on the money you deposit, and you receive a tax break with your distribution later in life. For this reason, Roth IRA contributions are not calculated on Form 1040. Report your tax deductible IRA contribution on Line 32 of Form 1040, or on Line 17, Form 1040A. Your account provider should send you a statement of contributions before tax season.

Reporting Distributions - Form 1040

If you have made any withdrawals from your IRA account, you will need to report these on your Form 1040 as well. This includes any optional distributions after age 59-1/2 or any mandatory withdrawals made after 70-1/2. You will receive a Form 1099-R from your IRA provider at the end of the year showing each time you withdrew money out of an IRA account. This information will be entered on a 1040, line 15.

Determining Tax Liability - Form 5329

It is important to realize the IRA provider will give information on your withdrawals to the IRS. This means you cannot hide the fact you took a withdrawal, even if the withdrawal is not permitted and you would prefer if the IRS did not know. You will have to pay taxes. Form 5329 will help you learn how much you owe. Early withdrawals are taxed at the given tax rate plus 10 percent penalties.

Reporting Account Modifications - Form 8606

If you have changed your IRA account during any given year, you will need to supply this information to the IRS. This information is supplied on your Form 1040, or your Form 8606, depending on the type of change you made. Rollover amounts are shown on a 1099-R. The amounts are supplied to you by your provider, and entered onto a 1040. If you converted your traditional IRA to another form of retirement account, you will need to report this event using Form 8606. This form is used to determine if you will have additional tax liability.

blog comments powered by Disqus