Did You Take an IRA Distribution in 2014? Check Your Mail

Tuesday, February 03, 2015

By Joe Cicchinelli, IRA Technical Expert
Follow Me on Twitter: @JoeCiccEdSlott

Most of us know to check our mail around this time of the year for our copies of IRS Form W-2, Wage and Tax Statement. Our employers have to send us copies of Form W-2 by January 31 of the following year. Because January 31, 2015 was a Saturday, the deadline to send us our 2014 Form W-2 was February 2, 2015. This IRS form gives us a lot of tax information such as how much money we were paid last year, how much income tax was withheld from our paychecks, and other important information we need to complete our federal income tax returns for the year. IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., is another important tax form you’ll also receive shortly if you took a distribution from an IRA last year.

If you took an IRA distribution in 2014, your IRA custodian has to send you a copy of Form 1099-R by February 2, 2015. Just like your Form W-2, you’ll have to give your CPA or other tax preparer a copy of your Form 1099-R to make sure your IRA distribution is properly reported on your federal income tax return.

If your IRA distribution last year was made payable to you, even if you properly rolled it over tax free to another IRA, you’ll still receive a Form 1099-R showing the withdrawal. The reporting of tax-free rollovers is a bit confusing.

Let’s say you took a $25,000 IRA distribution last year that was rolled over to another IRA within 60 days. Your 2014 Form 1099-R will show the $25,000 IRA distribution in Box 1 and also a taxable amount of $25,000 in Box 2a. However, none of it is actually taxable because you properly rolled it over. The Form 1099-R was not filled out incorrectly by your IRA custodian; it’s just a little misleading. But don’t worry; simply tell your tax preparer that your IRA distribution was rolled over so he or she can show it as tax free on your income tax return, IRS Form 1040. Note that IRS Form 5498, which you’ll receive in May, will show that the IRA distribution was in fact rolled over to an IRA.

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