IRS Form 1099-R (2014): Distributions From Pensions

What IRS Form 1099-R (2014) Is For

IRS Form 1099-R (2014) is used to report distributions from pensions, annuities, profit-sharing plans, IRAs, and insurance contracts. It provides essential information for both taxpayers and the Internal Revenue Service by detailing the gross distribution, taxable amount, and federal income tax withheld. This form ensures that plan participants accurately report their income and determine how much of their retirement distributions is taxable on their annual tax return.

Addressing any unfiled individual returns before reporting retirement distributions helps avoid IRS notices and potential penalties.

When You’d Use IRS Form 1099-R (2014)

You would use IRS Form 1099-R (2014) during the tax season when you receive a distribution of $10 or more from a qualified retirement account.

1. Normal distribution: This occurs when a plan participant withdraws funds from a traditional IRA or qualified plan after reaching age 59½, ensuring proper payment of federal income tax.
   
   
2. Early distribution: This occurs when funds are withdrawn before age 59½, often necessitating the completion of Form 5329 to report any additional penalties.
   
   
3. Direct rollover: This refers to a tax-free transfer from one qualified plan or IRA to another, resulting in a zero taxable amount on the form.
   
   
4. Corrected or amended forms: These are issued when the payer discovers reporting errors and must send a corrected version to the taxpayer.
   
   
5. Late or missing forms: This occurs when the payer fails to provide the form; in this case, you must use Form 4852 as a substitute.

Key Rules or Details for Tax Year 2014

IRS Form 1099-R (2014) establishes several essential rules and requirements for taxpayers reporting retirement distributions for the 2014 tax year.

1. Reporting threshold: Every payer must issue a separate Form 1099-R for any retirement distribution of $10 or more during the calendar year.
   
   
2. Distribution codes: Box 7 contains specific distribution codes, such as Code 1 for early distributions and Code 7 for normal distributions; each distribution code identifies the nature of the withdrawal and determines its tax treatment.
   
   
3. Federal income tax withholding: Most qualified retirement plans require a 20 percent withholding for federal income taxes unless the distribution is rolled directly into another qualified plan or IRA.
   
   
4. Taxable amount not determined: If Box 2a is left blank, the taxpayer is responsible for calculating the taxable portion using Form 8606 or personal account records.
   
   
5. Rollover rules: A direct rollover is tax-deferred, while a 60-day rollover requires the taxpayer to replace the withheld portion to maintain the full deferral benefit.
   
   
6. RMDs and survivor benefits: Required minimum distributions and survivor benefits are fully taxable and cannot be rolled over or deferred to another account.

If you’re assessed penalties for late or incorrect Form 1099-R reporting, our IRS penalty abatement solutions may provide relief.

Step-by-Step (High Level)

1. Verify personal details: Confirm that your name, account number, and mailing address are correct before including the form with your return.
   
   
2. Check the gross distribution: Review Box 1 to confirm the total distribution amount before any deductions or withholding.
   
   
3. Confirm the taxable amount: Examine Box 2a to determine the taxable portion of your distribution, and use Form 8606 if you made after-tax contributions.
   
   
4. Review withholding: Refer to Box 4 for the total federal income tax withheld, and report that amount as a payment on your federal tax return.
   
   
5. Identify the distribution code: Review Box 7 and refer to IRS Publication 575 to understand the distribution code and determine if penalties apply.
   
   
6. Report correctly: Record the gross and taxable amounts from the form in the retirement income section of Form 1040.
   
   
7. Attach supporting forms: Include Form 5329 for early distributions and Form 8606 for after-tax contributions when required.

You may designate an IRS Power of Attorney to have a tax professional handle complex reporting issues or communicate with the IRS on your behalf.

Common Mistakes and How to Avoid Them

Even minor reporting errors on IRS Form 1099-R (2014) can result in tax penalties or delays in the processing of refunds. The following are common mistakes and how to prevent them.

• Ignoring missing forms: Failing to report distributions because the form was not received can result in an IRS mismatch notice; taxpayers should use Form 4852 as a substitute if a 1099-R is missing.
  
  
• Reporting the entire distribution as taxable: Many distributions include a non-taxable portion; taxpayers should always check Box 2a and consider after-tax contributions before entering the taxable amount.
  
  
• Misinterpreting the distribution code: Each distribution code determines whether penalties apply; taxpayers should review Box 7 and verify its meaning using the official IRS instructions.
  
  
• Misreporting Rollovers: Rollovers should always be reported as non-taxable transactions. Taxpayers should write “ROLLOVER” next to the line item on Form 1040 to avoid double taxation.
  
  
• Omitting multiple forms: Taxpayers who receive more than one 1099-R must include all of them and accurately combine their totals.
  
  
• Forgetting to report state tax withheld: Some states, such as California, require separate reporting through the California Franchise Tax Board.

What Happens After You File IRS Form 1099-R (2014)

After you file your tax return, the Internal Revenue Service compares your reported data with the information submitted by your financial institutions. If the entries match, the return proceeds through standard processing, and any refund is issued on schedule. If discrepancies occur, the IRS sends a CP2000 notice explaining the adjustment. State agencies, such as the California Franchise Tax Board, may also review the state tax that has been withheld. 

FAQs

Do I owe taxes on a direct rollover or qualified plan loan offset?

A direct rollover or a qualified plan loan offset is not taxable if it is deposited into another qualified plan or individual retirement account within 60 days. The distribution code identifies this as a non-taxable transfer, but the total distribution must still be reported on your tax return for record-keeping purposes.

How do Roth contributions and designated Roth accounts affect taxation?

Roth IRAs, Roth SEP IRAs, and Roth simple IRAs allow for tax-free qualified withdrawals if conditions are met. Designated Roth contributions within employer-sponsored retirement plans grow tax-free, and the Internal Revenue Service considers these distributions non-taxable when both age and holding period requirements are satisfied.

Can I take a qualified charitable distribution or a lump sum distribution from my IRA?

A qualified charitable distribution (QCD) allows IRA owners who are 70½ or older to transfer funds directly to a charity without incurring federal income taxes. Lump sum distributions, however, are fully taxable unless they qualify for net unrealized appreciation or special tax treatment under IRS Publication 575.

How do after-tax and employee contributions impact the taxable amount?

Employee contributions and after-tax contributions reduce the taxable portion of a retirement distribution. Taxpayers should review Box 2a on Form 1099-R and maintain IRA contribution information to ensure accurate reporting of the non-taxable portion of total employee contributions.

What should I do if I have other traditional IRAs or inherited accounts?

Owners of traditional IRAs, inherited IRAs, or other conventional IRAs must include all retirement distributions on a single tax return. A professional tax adviser can help determine fair market value, calculate any service retirement income, and ensure compliance with final regulations issued by the Internal Revenue Service.

‍