Form 1099-R Checklist: (2016) Tax Year
Purpose
Form 1099-R reports distributions from pensions, annuities, IRAs, qualified plans, section 403(b) plans, and section 457(b) government plans. For 2016, recipients must correctly identify distribution codes in box 7, apply the simplified method or Form 4972 election based on annuity starting date and plan type, and recognize that Code D identifies annuity payments from nonqualified annuities subject to the section 1411 net investment income tax.
Required Steps For 2016 Recipients
Verify Gross Distribution and Taxable Amount
You must verify that the box 1 gross distribution amount matches your plan statement. If box 2a is blank and the box 2b first checkbox is marked, you must compute the taxable amount yourself using the simplified method on Form 1040, 1040A, or 1040NR.
The simplified method applies to annuity starting dates after 1997 only. Publication 590-A and Publication 590-B provide specific guidance for 2016 IRA distribution rules that you need to calculate your taxable amount correctly.
Evaluate Form 4972 Eligibility
Check if you were born before January 2, 1936, or are a beneficiary of someone born before that date. If box 3 shows capital gain and code A appears in box 7, you remain eligible to use Form 4972's 10-year tax option for qualified lump-sum distributions.
This eligibility applies to any year you receive such a distribution, not exclusively to 2016. The 10-year tax option provides special tax treatment that can reduce your tax liability on the lump-sum distribution.
Complete Form 8606 for Roth IRA Distributions
- For Roth IRA distributions, you must complete Form 8606 to determine taxable earnings.
- If box 2a shows an amount, it represents taxable excess contribution earnings.
- You must report these amounts on Form 8606 lines specific to 2016.
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
Confirm Required Minimum Distribution Compliance
If you are age 70½ or older, verify you took your required minimum distribution for 2016, as failure to withdraw the full RMD triggers a 50% excise tax under 2016 Internal Revenue Code rules. Publication 590-B contains 2016 life expectancy tables and RMD calculation worksheets to verify compliance.
Identify Section 1411 Net Investment Income Tax Applicability
Identify the distribution code in box 7 for 2016. If Code D appears, annuity payments from nonqualified annuities may be subject to the section 1411 net investment income tax.
The 3.8% threshold rules for 2016 apply based on modified adjusted gross income thresholds of $200,000 for single filers and $250,000 for married filing jointly. Report these distributions on Form 8960 using 2016 modified adjusted gross income calculations.
Report Loan Distributions
If code L appears in box 7, a loan from a qualified plan, section 403(b), or section 457(b) plan was treated as a taxable distribution in 2016. Include the full loan amount in income unless an exception applies under Publication 575.
Attach Required Copies to Tax Returns
Payers must furnish Copies B, C, and 2 to recipients by January 31, 2017, and you should attach Copy B to your 2016 federal return only if federal income tax was withheld as shown in box 4. Claim the withheld amount on the line for income tax payments, and retain state and local copies for your records.
Apply Net Unrealized Appreciation Rules
If box 6 shows net unrealized appreciation and you received a lump-sum distribution from a qualified plan, you may defer taxation on NUA until you sell the securities. Do not include NUA in the taxable amount if you do not elect inclusion on the 2016 Form 4972.
Report Direct Rollover Distributions
- For direct rollover distributions, Code G appears in box 7, and box 2a should show zero for the taxable amount.
- You must enter zero on the taxable amount line of your tax return.
- For rollovers from a non-Roth plan to a Roth IRA, box 2a shows the taxable amount, and box 5 shows any basis recovery.
- Do not automatically add box 6 to taxable income for Roth conversions.
Understand Designated Roth Account Reporting
Box 11 reports the first year of the 5-taxable-year period for designated Roth accounts. This information determines whether distributions qualify as tax-free qualified distributions. Box 5 shows the designated Roth contribution amount included in the current distribution, not your total cumulative account basis.
Review State and Local Withholding
Review state and local withholding boxes 12 through 17. If boxes 14 or 17 show distribution amounts subject to state or local tax, report these amounts on the appropriate state or local return for the 2016 tax year.
Check FATCA Filing Requirements
Check the FATCA filing requirement box on your Form 1099-R, as a mark indicates you may have a Form 8938 filing requirement for 2016. You must verify that your total foreign financial assets exceed the 2016 threshold amounts based on your filing status and residency status.
2016 Year-Specific IRS Updates
New Distribution Code for Net Investment Income Tax
Code D was added to box 7 in the 2016 instructions to identify annuity payments from nonqualified annuities subject to the section 1411 net investment income tax. Recipients must cross-reference Form 8960 and the 2016 modified adjusted gross income thresholds.
Box 10 Reporting for In-Plan Roth Rollovers
Box 10 displays the portion of your distribution that relates to in-plan Roth rollovers completed within the preceding five-year period. This amount requires special tax treatment and may trigger early distribution penalties if you have not met the age and holding period requirements.
If Code B appears with a box 10 entry, you must complete Form 5329 to determine the applicability of the 10% early distribution penalty for 2016.
Section 1035 Exchange Treatment
Section 1035 exchange distributions with Code 6 received special treatment in 2016. If life insurance, annuity, qualified long-term care, or endowment contracts were transferred tax-free, you must report zero taxable amount on your tax return, even though box 1 shows the contract value.
Qualified Long-Term Care Insurance Premium Exclusion
Qualified long-term care insurance premiums paid from the cash value of an annuity or life insurance contract receive a 2016-specific exclusion with Code W. The amount shown in box 8 as a reduction is not taxable, and no income recognition occurs in 2016 for distributions reported with this code.
Minimum Distribution Requirements Enforcement
Minimum distribution requirements for age 70½ and older recipients were strictly enforced in 2016. IRS publications Publication 590-A and Publication 590-B contain 2016 life expectancy tables and RMD calculation worksheets used to verify compliance.
IRA Recharacterization Timing Distinctions
Code N reports recharacterization of an IRA contribution made for 2016 and recharacterized in 2016, while Code R reports recharacterization of a 2015 contribution recharacterized in 2016. Both codes require Form 8606 reconciliation using the 2016 year-end basis, and the form shows the recharacterized amount in box 1 and zero in box 2a.
Electronic Filing Requirements
Electronic filing of Form 1099-R for payers was extended in 2016, and paper forms scanned during processing cannot be filed from printed IRS website versions. Payers must use approved software that generates Publication 1220 specifications or face rejection of their filings.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
