Form 1099-R: Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (2014)

What Form 1099-R Is For

Form 1099-R is an informational tax document issued by financial institutions, pension plan administrators, and insurance companies to report distributions (withdrawals or payments) of $10 or more from various retirement accounts and plans. Think of it as a receipt showing money you received from your retirement savings during the year.

This form covers a wide range of retirement-related payments, including distributions from traditional IRAs, 401(k) plans, 403(b) plans, pension plans, annuities, profit-sharing plans, governmental 457(b) plans, and insurance contracts. Whether you withdrew money from your IRA, received regular pension payments, rolled over retirement funds to another account, or even took out certain disability payments, you'll likely receive a Form 1099-R documenting these transactions.

The form serves multiple purposes: it informs you of how much you received, helps you calculate how much is taxable, indicates whether taxes were withheld, and provides distribution codes that explain the nature of your withdrawal. The IRS also receives a copy, allowing them to match the information against your tax return to ensure accurate reporting.

Understanding Form 1099-R is crucial because retirement distributions are often taxable income, though some portions may be tax-free if you made after-tax contributions to your retirement account. The form helps you distinguish between taxable and non-taxable amounts, and identifies whether special tax treatment or penalties might apply to your distribution. IRS Form 1099-R Instructions 2014

When You’d Use Form 1099-R

Normal Filing Timeline

You should receive Form 1099-R by January 31, 2015 (for tax year 2014) from any institution that paid you retirement distributions during 2014. You'll use this form when preparing your 2014 federal income tax return, which is due April 15, 2015. The amounts from Form 1099-R are typically reported on lines 15a/15b (IRA distributions) or 16a/16b (pensions and annuities) of Form 1040, or the corresponding lines on Form 1040A.

Late or Missing Forms

If you don't receive your Form 1099-R by early February 2015, first contact the financial institution or plan administrator that should have issued it. If you still cannot obtain the form, you must still report the income on your tax return based on your own records. You can use Form 4852 (Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R) as a substitute when filing your return. This form allows you to report the distribution even without the official 1099-R.

Corrected Forms

Sometimes you'll receive a “CORRECTED” Form 1099-R that replaces an earlier version containing errors. This might happen if the payer reported incorrect amounts, wrong distribution codes, or other mistakes. When you receive a corrected form, you must use the corrected information on your tax return. The word “CORRECTED” will appear prominently on the form.

Amended Returns

If you discover after filing your tax return that your Form 1099-R contained errors, or if you receive a corrected Form 1099-R after filing, you may need to file an amended return using Form 1040X. You typically have three years from the original filing deadline to amend your return. When filing Form 1040X, explain the changes in Part III and attach any corrected Forms 1099-R or supporting documentation. IRS Publication 575 (2014)

Key Rules or Details for 2014

Reporting Threshold

Financial institutions must issue Form 1099-R for distributions of $10 or more during the calendar year. Even if you received less than $10, the distribution is still reportable income on your tax return.

Distribution Codes (Box 7)

Box 7 of Form 1099-R contains critical distribution codes that explain the type of distribution and determine tax treatment. For 2014, common codes included:

• Code 1: Early distribution (before age 59½), subject to 10% penalty
• Code 2: Early distribution, exception applies (no penalty)
• Code 4: Death benefit
• Code 7: Normal distribution (age 59½ or older)
• Code G: Direct rollover to another retirement account
• Code J: Early distribution from a Roth IRA
• Code K: Distribution of IRA assets not having readily available fair market value (new for 2014)

Taxability

The taxable amount depends on whether you made after-tax contributions to your retirement account:

• Fully taxable: Most distributions from employer plans where you didn't contribute after-tax dollars
• Partially taxable: Distributions where you recover your cost basis (after-tax contributions) tax-free
• Tax-free: Qualified Roth IRA distributions or return of contributions

Withholding Requirements

For most retirement distributions (except from IRAs), payers must withhold 20% for federal income taxes unless the distribution is directly rolled over to another qualified retirement account. For IRA distributions, 10% withholding applies unless you elect out using Form W-4P.

Direct Rollovers

In 2014, you could avoid immediate taxation by directly rolling over eligible distributions to another qualified retirement plan or IRA. Direct rollovers (trustee-to-trustee transfers) are reported on Form 1099-R with code G, showing the gross distribution but zero taxable amount.

60-Day Rollover Rule

If you received a distribution that wasn't directly rolled over, you had 60 days to deposit it into another qualified retirement account to avoid taxation. However, the 20% withholding still applies initially, and you must replace that amount from other funds to roll over the full distribution amount.

Early Distribution Penalty

Distributions before age 59½ generally incur a 10% additional tax penalty unless an exception applies (disability, qualified medical expenses, substantially equal periodic payments, etc.). This penalty is calculated on Form 5329. IRS Instructions for Form 1099-R (2014)

Step-by-Step (High Level)

Step 1: Verify Your Personal Information

Check boxes 1-2 for your name, address, and Social Security number. Ensure all information is correct, as errors could delay your refund or cause matching problems with IRS records.

Step 2: Identify the Gross Distribution (Box 1)

Box 1 shows the total amount distributed from your retirement account before any taxes or other deductions. This is the starting point for determining your taxable income.

Step 3: Determine the Taxable Amount (Box 2a)

Box 2a shows the taxable portion of your distribution. Sometimes this box is blank, with the “Taxable amount not determined” checkbox marked in Box 2b, meaning you must calculate the taxable amount yourself. For IRA distributions, if you made non-deductible contributions, you'll need to complete Form 8606 to figure the tax-free portion.

Step 4: Review Your Cost Basis (Box 5)

Box 5 shows your after-tax contributions being returned to you tax-free. This typically appears when you made non-deductible contributions to your retirement account over the years.

Step 5: Check the Distribution Code (Box 7)

This critical box identifies what type of distribution you received. The code determines whether penalties apply, special tax treatment is available, or the distribution is exempt from early withdrawal penalties. Multiple codes may appear together.

Step 6: Verify Federal Tax Withholding (Box 4)

Box 4 shows federal income tax already withheld from your distribution. Include this amount on your Form 1040 as a credit toward your tax liability, just like withholding from wages.

Step 7: Report on Your Tax Return

Transfer the information to your Form 1040:

• For IRA distributions: Report the gross amount (Box 1) on line 15a and the taxable amount (Box 2a) on line 15b
• For pensions and annuities: Report the gross amount on line 16a and the taxable amount on line 16b
• Include any federal tax withheld from all Forms 1099-R on line 64 (payments section)

Step 8: Check for Additional Forms Needed

Depending on your distribution code and circumstances, you may need additional forms:

• Form 8606: For non-deductible IRA contributions
• Form 5329: For early distribution penalty calculations or exceptions
• Form 4972: For lump-sum distribution tax calculations (if you qualify for special treatment) IRS Publication 575 (2014)

Common Mistakes and How to Avoid Them

Mistake #1: Ignoring a Missing Form 1099-R

Many taxpayers believe if they don't receive the form, they don't need to report the income. This is wrong—the IRS receives copies of all Forms 1099-R, and failing to report distributions will trigger a mismatch notice and potential penalties. Solution: Keep your own records of all retirement withdrawals. If you don't receive a Form 1099-R by early February, contact the payer immediately or use Form 4852 as a substitute.

Mistake #2: Reporting the Wrong Amount as Taxable

Taxpayers often report the entire Box 1 amount as taxable, even when Box 2a shows a smaller taxable amount or when they have after-tax contributions that should be recovered tax-free. Solution: Always check Box 2a first. If it's blank and you made after-tax contributions, calculate the tax-free portion using Form 8606 for IRAs or the Simplified Method worksheet for pensions.

Mistake #3: Missing the Distribution Code Implications

Distribution codes determine critical tax consequences, including whether the 10% early withdrawal penalty applies. Ignoring codes like “1” (early distribution, no exception) can result in underpayment of taxes. Solution: Look up your distribution code in the IRS instructions and determine if you qualify for any penalty exceptions. Complete Form 5329 if required.

Mistake #4: Failing to Report Rollovers Correctly

Some taxpayers don't report rollovers at all, thinking they're non-taxable. Others report them as taxable income even though they properly rolled the funds over. Solution: Always report the gross distribution on your return, but enter zero or the appropriate amount as taxable if you completed a proper rollover within 60 days. Write “ROLLOVER” next to the entry if needed.

Mistake #5: Not Reconciling Multiple Forms 1099-R

If you took several distributions during the year or had distributions from multiple accounts, you'll receive multiple Forms 1099-R. Taxpayers sometimes forget to include all forms. Solution: Gather all your Forms 1099-R before preparing your return. Add up the totals from all forms and report the combined amounts on your tax return.

Mistake #6: Confusing Corrected Forms

When a corrected Form 1099-R arrives after filing your original return, some taxpayers ignore it, thinking it's too late. Others file duplicate amended returns for the same correction. Solution: If you receive a corrected form before filing, use those figures. If you receive it after filing and the changes are significant, file one Form 1040X with the corrected information.

Mistake #7: Missing Required Minimum Distribution (RMD) Exceptions

In 2014, if you turned 70½, you were required to begin taking minimum distributions from traditional IRAs and most retirement plans. RMDs cannot be rolled over and are fully taxable. Solution: Know your RMD obligations. If you're age 70½ or older, ensure you've taken your full RMD before attempting any rollovers, as rolling over an RMD is a prohibited transaction. IRS Instructions for Form 1099-R (2014)

What Happens After You File

IRS Matching Process

After you file your tax return, the IRS matches the information you reported against the Forms 1099-R filed by payers. This automated matching process typically occurs several months after the filing deadline. If your return matches the IRS records, your return continues processing normally.

Discrepancy Notices

If the IRS finds a mismatch between your return and the Forms 1099-R on file, you'll receive a notice (typically CP2000, “Underreporter Inquiry”) proposing changes to your tax return and calculating additional tax owed. This usually happens 12-18 months after filing. You have the right to respond, provide documentation showing the IRS records are incorrect, or explain why your reporting was correct.

Refund Processing

If you're due a refund and your return matches IRS records, you should receive your refund within 21 days for e-filed returns with direct deposit, or 6-8 weeks for paper returns. However, retirement distribution reporting errors can delay refund processing.

Early Withdrawal Penalty Assessment

If you took an early distribution (before age 59½) without an exception, the IRS will check for Form 5329 reporting the 10% additional tax. If you didn't file Form 5329 when required, you'll receive a notice assessing the penalty plus interest.

State Tax Implications

Most states that impose income tax also receive information about your retirement distributions. Some states have different rules than the federal government about taxing retirement income. For example, some states don't tax certain pension income or provide exclusions for taxpayers over specific ages. Check your state's requirements separately.

Future Tax Planning

The IRS uses your Form 1099-R information to track your retirement account activity. If you took a partial distribution or rollover in 2014, the IRS expects to see consistent reporting in future years. Keep copies of all Forms 1099-R for at least three years (the general audit statute of limitations), or longer if you have basis in your retirement accounts that you'll recover over time.

Audit Considerations

While receiving a Form 1099-R doesn't automatically trigger an audit, retirement distributions are a focus area for IRS compliance. High-dollar distributions, early withdrawals without exceptions, and inconsistent reporting year-over-year may increase audit risk. Maintain documentation supporting your tax treatment, especially for rollovers, exceptions to early withdrawal penalties, and non-deductible contribution basis. IRS Publication 575 (2014)

FAQs

Q1: I rolled my 401(k) directly into an IRA. Do I owe taxes?

No, if you completed a direct rollover (trustee-to-trustee transfer), the distribution is generally not taxable. Your Form 1099-R should show the distribution amount in Box 1 and zero in Box 2a (taxable amount), with code “G” in Box 7. Report the gross distribution on your Form 1040 but enter zero as the taxable amount. Some taxpayers write “ROLLOVER” next to the line to clarify. However, you must still report it on your tax return even though it's not taxable.

Q2: What if Box 2a (taxable amount) is blank on my Form 1099-R?

When Box 2a is blank and the “Taxable amount not determined” box is checked in Box 2b, the payer is telling you that you're responsible for calculating the taxable portion. This commonly happens with IRA distributions when you may have made non-deductible contributions over the years. You'll need to complete Form 8606 to calculate the tax-free portion. If you never made non-deductible contributions, the entire distribution is likely taxable.

Q3: I received my Form 1099-R after I already filed my tax return. What should I do?

If you properly estimated and reported the distribution on your original return using your own records, you likely don't need to do anything. However, compare the Form 1099-R you received with what you reported. If there are significant differences in the amounts or if you didn't report the distribution at all, you'll need to file Form 1040X (Amended U.S. Individual Income Tax Return) to correct your return. You have three years from the original filing deadline to file an amendment.

Q4: I'm under age 59½ and took a distribution for medical expenses. How do I avoid the 10% penalty?

While certain exceptions exist to the 10% early distribution penalty, you must properly claim them. If your Form 1099-R shows distribution code “1” in Box 7 (early distribution, no known exception), you'll need to file Form 5329 with your tax return to claim the exception. For medical expenses, the exception applies only to unreimbursed medical expenses exceeding 10% of your adjusted gross income (7.5% if you or your spouse was 65 or older). Document your medical expenses carefully, as you'll need to substantiate the exception.

Q5: What's the difference between a direct rollover and a 60-day rollover?

A direct rollover (trustee-to-trustee transfer) means the money moves directly from one retirement account to another without you ever receiving the funds. This avoids the mandatory 20% withholding and eliminates the risk of missing the 60-day deadline. With a 60-day rollover, you receive the distribution (usually with 20% withheld for taxes), and you have 60 days to deposit the funds into another qualified retirement account. You must replace the withheld amount from other funds to roll over the full distribution. Direct rollovers are strongly preferred for their simplicity and tax advantages.

Q6: Can I roll over my required minimum distribution (RMD)?

No, required minimum distributions cannot be rolled over. If you're 70½ or older in 2014, you must take your full RMD for the year before attempting any rollovers. If you try to roll over an RMD, it's treated as an excess contribution to the receiving account, which carries a 6% annual penalty until corrected. Calculate your RMD first, withdraw that amount, and only then can you roll over any additional distributions that exceed your RMD.

Q7: I made after-tax contributions to my retirement account years ago. How do I recover these tax-free?

After-tax contributions create “basis” in your retirement account, which you can recover tax-free. For IRAs, you track this using Form 8606 each year. For employer plans, the payer should show your after-tax contributions in Box 5 of Form 1099-R. When you take distributions, a portion is tax-free based on the ratio of your after-tax contributions to your total account balance. Keep careful records of all after-tax contributions, as you'll need to prove your basis if questioned. For pensions starting after November 18, 1996, you typically use the Simplified Method to calculate the tax-free portion of each payment.

IRS Form 1099-R Instructions 2014 | IRS Publication 575 (2014)

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