What IRS Form 1099-R (2015) Is For
IRS Form 1099-R (2015) is used to report distributions of $10 or more from retirement accounts and qualified plans. It provides essential information on payments made from pensions, annuities, IRAs, insurance contracts, and profit-sharing plans. The form details the gross distribution, taxable amount, and federal income tax withheld for the year. It also includes distribution codes that identify the type of payment, such as early distributions, rollovers, or qualified distributions.
Understanding the IRS collection process can help you take the right steps if you receive a notice regarding your 1099-R distributions.
When You’d Use IRS Form 1099-R (2015)
You will use this form when certain types of retirement-related transactions occur during the tax year:
- Retirement distributions: When funds are withdrawn from a 401(k), traditional IRA, or any other qualified retirement plan, the distribution must be reported for tax purposes.
- Roth IRA conversions: When converting a traditional IRA to a Roth IRA or performing in-plan Roth rollovers, you must include the transaction as a taxable event if applicable.
- Direct Rollovers and Eligible Rollover Distributions: When transferring money between eligible retirement plans or completing a direct rollover, you must report the transaction, even if it remains tax-deferred.
- Corrected or late filings: When a corrected 1099-R form is received after the original tax return submission, you must file an amended return to ensure accurate reporting.
Key Rules or Details for the 2015 Tax Year
Several vital rules applied when completing IRS Form 1099-R (2015):
- Distribution codes: Each form included a distribution code in Box 7 that identified the type of transaction, such as early distributions, qualified distributions, direct rollovers, or death-related payments.
- $10 reporting threshold: All distributions of $10 or more require reporting, although some financial institutions voluntarily report smaller amounts for accuracy and transparency.
- Mandatory 20% federal income tax withholding: For eligible rollover distributions that were not directly transferred, payers were required to withhold 20% of the gross distribution for federal income tax.
- Five-year rule for Roth IRAs: A qualified Roth distribution was only tax-free if the account had been open for at least five years and the taxpayer met other qualifying conditions, such as age or disability.
- Taxable amount calculation: When the “taxable amount not determined” box was checked, taxpayers needed to calculate the taxable amount based on their after-tax contributions and prior IRA contributions.
- Fair market value requirements: Distributions involving employer securities or insurance contracts must reflect the fair market value of the underlying assets as of the date of distribution.
Step-by-Step (High Level)
To complete and report IRS Form 1099-R (2015) correctly, follow these steps:
- Verify personal and payer information: Check that your name, address, and Social Security number are accurate, and confirm that the payer’s identifying information is correct.
- Review Box 1 (Gross Distribution): Confirm the total distribution amount, which includes all withdrawals, direct rollovers, Roth IRA conversions, and transfers from eligible retirement plans.
- Determine Box 2a (Taxable Amount): Identify how much of the distribution is taxable; if the box is blank, calculate the amount based on after-tax contributions or employee contributions.
- Check Box 4 (Federal Income Tax Withheld): Record the amount withheld for federal income tax as a payment credit on your tax return.
- Understand Box 7 (Distribution Codes): Review the distribution code, such as Code 1 for early distribution, Code 7 for normal distribution, or Code G for a direct rollover, since this affects tax treatment.
- Report correctly on Form 1040: Enter the gross and taxable amounts on the appropriate lines for pensions, annuities, or IRAs, and include any applicable supporting forms.
- Include related forms: Attach Form 5329 for early distribution penalties, Form 8606 for nondeductible IRA contributions, or Form 4972 for lump-sum distributions if required.
- Document exceptional cases: Report qualified plan loan offsets, charitable gift annuities, or deemed distributions separately if they involve multiple plan accounts or special rules under the tax year.
Taking care of any unfiled individual returns is essential to prevent IRS notices and penalties related to retirement account distributions.
Common Mistakes and How to Avoid Them
When preparing IRS Form 1099-R (2015), taxpayers often make preventable errors that can lead to penalties or notices from the IRS:
- Unreported distributions: Always report each Form 1099-R you receive; unreported retirement plan distributions trigger automated IRS matching notices.
- Incorrect taxable amount: If the “taxable amount not determined” box is checked, calculate the taxable portion using Form 8606 to ensure proper reporting of after-tax contributions.
- Misinterpreting distribution codes: Review Box 7 carefully to understand how the distribution code affects your tax consequences and whether any exceptions apply.
- Ignoring corrected forms: If you receive a corrected 1099-R after filing, submit Form 1040-X to amend your return and prevent processing delays.
- Partial rollover errors: When only part of a total distribution is rolled over, deposit any withheld amounts within 60 days to maintain eligibility for rollover contribution treatment.
- Missing required minimum distributions: For participants over age 70½, ensure all required minimum distributions are taken to avoid the 50% excise tax.
- Neglecting estimated tax payments: Adjust your estimated tax payments when early distributions increase your gross income or affect withholding totals.
What Happens After You File IRS Form 1099-R (2015)
After submission, the IRS compares your tax return with the information filed by your retirement plan administrator. The agency verifies that the gross distribution, taxable amount, and federal income tax withheld align with your participant’s gross income. If discrepancies appear—such as missing early distributions, rollover contributions, or excess deferrals—you may receive a CP2000 notice proposing changes to your tax return.
If you owe additional taxes after reporting your retirement distributions, an IRS payment plan may be available to help you manage your payments.
FAQs
What is the purpose of IRS Form 1099-R (2015)?
IRS Form 1099-R (2015) reports taxable and nontaxable distributions from pensions, annuities, profit-sharing plans, IRAs, and insurance contracts. It helps both taxpayers and the IRS determine the correct taxable amount, federal income tax withheld, and overall tax consequences related to the distribution.
Do I pay taxes on a direct rollover from one retirement account to another?
No, a direct rollover is an eligible rollover distribution and is not subject to current taxation if the funds move within the same plan or another qualified plan. However, the transaction must still be reported to the IRS for tax record-keeping purposes.
How are Roth IRA conversions reported?
Roth IRA conversions are shown as gross distributions on Form 1099-R. The converted amount is generally included in gross income, unless it consists of after-tax contributions. These amounts must be reported accurately to ensure the proper taxation of Roth conversions.
What should I do if I receive a corrected 1099-R form?
You should file Form 1040-X to amend your original tax return. A corrected form ensures accurate reporting of the taxable amount, gross distribution, and any federal income tax withheld from your retirement account.
How do early distributions affect my tax liability?
Early distributions, generally those taken before age 59½, are subject to an additional 10% tax unless an exception applies. Exceptions include disability, certain medical expenses, or first-time homebuyer withdrawals as defined by the IRS.
