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2 March 2020 / Tax Preparation

How to Use a 1099-R Form

2 March 2020 > Tax Preparation

Your 1099-R form is a specific type of 1099 form for reporting distributions related to certain retirement plans. You’ll likely receive one in the mail if you committed certain qualifying actions for a tax year. Understanding how this form works, and what to do when you get it, is vital if you want to complete your tax return accurately. 

The Basics of a 1099-R

Let’s start with the basics of a 1099-R form. Form 1099, in general, is an IRS tax form used as an informative document to report income other than wages, salaries, and tips. Wages, salaries, and tips are reported with a W-2—a similar, but distinct form. There are many subtypes of 1099 that can be issued, and the 1099-R is one specific subtype. 

Form 1099-R is formally called “Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.” It’s designed to report income from a number of different financial products and retirement plans, including annuities, profit-sharing plans, individual retirement accounts (IRAs), retirement plans, insurance contracts, and pensions. 

This document will provide you with a summary of distributions you received from relevant accounts in your name for a given tax year. This income may or may not be taxable, but it’s your responsibility to include this information, when applicable, in your tax return. Note that this income has already been reported to the IRS; the IRS “knows” you’ve received this income, so avoiding paying taxes related to this income is inadvisable. 

Who Will Receive a 1099-R? 

Any U.S. adult can receive a 1099-R if they receive distributions of $10 or more from any of the following: 

  • Profit-sharing or retirement plans. Most employer-sponsored retirement plans and profit-sharing plans for employees qualify here.

     

  • Individual retirement accounts (IRAs).Traditional, Roth, and SIMPLE IRAs could qualify for a 1099-R, even if your distributions aren’t taxable.

     

  • Annuities. Payments from annuities and charitable gift annuities are included.

     

  • Pensions. Pension plan distributions are also included.

     

  • Insurance contracts. Certain types of insurance contracts will also require their distributions to be reported with a 1099-R.

     

  • Survivor income benefit plans. This type of group life insurance will disburse payments to a qualified survivor, and track those payments with a 1099-R.

     

  • Permanent and total disability payments, if under certain life insurance contracts.

You should know that not all 1099-R forms mean you’ll owe taxes on the income that was reported. For example, if you directly rolled over a 401(k) plan to an IRA, you will not owe taxes on that money. 

1099-R forms are distributed by the issuers of your plans. These could be brokerages, financial institutions, employers, or insurance providers. Each 1099-R will include the taxpayer identification number (TIN) of the entity that issued it. 

You may receive multiple 1099-R forms if you have multiple applicable distributions from multiple different sources. 

When Can You Expect to Receive a 1099-R? 

Distributors are required to send 1099-R forms to the people who need them by January 31 of the year following the tax year, like most other 1099 forms. If you don’t receive one by early February, it may mean you’re not going to get one. If you’re expecting one and you haven’t gotten one by early February, you may want to contact the responsible party to see if there’s been a mistake. 

Information Found on Form 1099-R

On your 1099-R form, you’ll find several pieces of information, including: 

  • Payer information. Here, you’ll find the payer’s (the issuer’s) name, your street address, city or town, state or province, country, ZIP or foreign postal code, and phone number. If there are any mistakes you find with the 1099-R, this is the information you’ll use to call and rectify the mistake.

     

  • Recipient information. Here, you’ll find your own name, your street address, city or town, state or province, country, and ZIP or foreign postal code. You’ll also find your own TIN, which if you’re an individual, will be your social security number.

     

You’ll also find information on your distributions, including: 

  • Gross distribution, or the total amount of money that was distributed to you from this account.

     

  • The taxable amount, or the amount of that money that was subject to tax. Note that not all distributions reported with a 1099-R are subject to tax. Your provider may also check a box labeled “taxable amount not determined,” or mark that the entire distribution was taxable.

     

  • Capital gain, which will also be included in your taxable amount.

     

  • Federal income tax withheld, or the amount already withheld for federal income tax purposes.

     

  • Employee contributions, as well as designated Roth contributions and insurance premiums.

     

  • Net unrealized appreciation in employer’s securities.

     

  • Distribution codes, with a separate box for accounts known as IRA/SEP/SIMPLE.

     

  • Percentage of total distribution.

     

  • Total employee contributions.

     

  • Amount allocable to IRR within 5 years.

     

  • Account number.

     

  • 1st year of designated Roth contributions.

     

  • Date of payment.

     

  • State and local taxes withheld, including the names of those localities.

     

Some or all of these fields may be filled out. You may not need all of the information in these fields to finish your tax return. 

Rectifying 1099-R Mistakes

There are a few mistakes that could interfere with your reception and use of a 1099-R form: 

  • You received a 1099-R form, but shouldn’t have. Though rare, it’s possible that you received a 1099-R form when it wasn’t appropriate. In this case, an agent may have recorded a distribution that didn’t truly happen, or you might have a distribution that was not completed.

     

  • Incorrect personal information. You may also notice issues with the personal information that was reported on the form. Usually, these are typos, but if you notice someone else’s name on the form, or other incorrect information, it’s important to report it. If the address is wrong, you may not receive the form—which leads to our next possible mistake.

     

  • You didn’t receive a 1099-R form, but should have. Occasionally, agents will fail to send you a 1099-R form even if you’re owed one. You may also fail to receive a form due to an address change or similar logistical mix-up.

     

  • Amounts reported are erroneous. In some cases, you may also see erroneous amounts of money reported. It’s vital to clear up these rare mistakes as soon as possible.

     

If you notice any of these mistakes, your best course of action is to contact the issuer as soon as possible. They should be able to provide you with more information, which could clear up the mistake. If not, they may send you a new 1099-R form.   

How to Use a 1099-R Form 

If you receive a 1099-R form, you’ll likely need to include it as part of your income in your tax return, much like you’ll report the income from other 1099s. If the income is taxable, you’ll include it as part of your total income for the year. If it’s not subject to tax, you can exempt it. 

It can be difficult to determine what percentage of your 1099-R reported income is taxable, and how to tax it appropriately. Many people who receive a 1099-R form choose to work with a professional tax preparer to make things easier on themselves, and reduce the chances of committing an error. 

If you’re getting ready to complete your tax return and you’re not sure what to do with your 1099-R, or if you’re just overwhelmed by the sheer number of things you still need to do for your taxes, don’t worry—Taxfyle can help. Get started with an individual tax return today, and feel confident about your taxes. 

Steven de la Fe

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