IRA Distributions

Taxpayers receiving distributions from an individual retirement account (“IRA”) must report such income on Line 15 of Form 1040. To do so, a taxpayer should gather all Form 1099-R statements issued during the year. These forms are sent from each bank, mutual fund, or retirement plan that distributed funds to the taxpayer. Once collected, the taxpayer should set aside 1099-R statements that were not sent on behalf of an IRA (Those forms may be used to calculate Line 16’s Pensions and Annuities value).

Using a calculator, taxpayers need to add up all the distribution amounts from Box 2 of every IRA 1099-R. This summed value is then entered onto Form 1040’s Line 15b. Furthermore, any taxpayer who “rolled over” (or reinvested) an IRA(s) should sum the total amount rolled over with the value listed on Line 15b. This larger value should be listed on Line 15a and the word “Rollover” needs to be written next to line 15b.

Taxpayers should also ensure they are properly reporting the income withheld from the IRA(s). Box 4 of Form 1099-R lists the federal withholdings while Box 12 lists the state withholdings. Taxpayers with values in these boxes should be certain these values are represented on both their federal (Line 64) and state returns. Those neglecting to do so may risk forfeiting that withheld money altogether.

NOTE: Taxpayers who (1) withdrew money from an IRA, (2) were under age 59.5 at the end of the year, and (3) did not rollover that money may owe an additional 10% tax. Please consult Publication 590 (“Early Distributions” section) for additional information regarding early IRA withdrawals.

Photo by: Mike Baird