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Understanding IRS Form 5498

The federal government has an interest in making sure people sock away money for retirement, so many contributions you make to certain individual retirement arrangement (IRA) accounts are tax-deductible until you finally pull that money out once you are in your seventies.  Of course, there is a limit on how much you can deduct every year, but it can add up to a pretty tidy deduction, and when it comes to your tax bill, every bit helps.

If you are saving for retirement (and you should be, no matter what age you are) there are some things you need to know about IRS Form 5498.

  1. It’s not your responsibility to file it with the government.  Whoever acts as the trustee or the IRA issuer is required by law to file this form with the IRS.  If you receive a copy from them, it’s only for your files.
  2. Rolling over or converting assets from a different retirement plan into an IRA isn’t tax deductible.  However, they are still treated as “contributions” by the IRS, so they go in a separate box on the form.  However, there are other rules covering special cases like rollovers between traditional IRAs and specialized accounts like SEP IRAs and Roth IRAs.  Check with the administrator of your plan if you have questions.
  3. If you are married or have two retirement plans, you might not be able to get the full deduction.  If you have a tax-advantaged retirement account aside from your IRA, or your spouse is also contributing to their own IRA, you may bump up against the maximum contribution amount set by the IRS.
  4. You can deduct current-year contributions from prior-year tax returns.  This is a great thing – if a little confusing.  Essentially, you can claim all of your contributions from 2014 on your 2013 tax return through April 15th.  This is why you may not receive a copy of your form 5498 from your plan administrator until May 31st, the legal deadline.
  5. You can’t deduct contributions to Roth IRAs, SIMPLE IRAs or SEP plans.  There are a variety of reasons for this, most of them involving the time at which you pay the taxes (Uncle Sam will always get his money, no matter what) but if you are not contributing to a traditional IRA, you can’t deduct your contributions on a tax return.

There you have them – five facts everyone needs to know about IRS Form 5498.  If it’s all still a whirlwind, don’t worry – there is help available.  You can use specialized software to help with your Form 5498 from a website like 1099fire.com, which also has a bunch of other services available no matter what form or part of your taxes you are struggling with.  It is always better to be safe than sorry when it comes to the IRS – so if you have questions or are unsure about anything, don’t hesitate to seek out professional help!

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Erich J. Ruth

Erich J. Ruth provides technical support for National Software which is the parent company for 1099FIRE. 1099FIRE develops and markets a comprehensive range of products that enables any size of business or institution to effectively manage and comply with year-end filing requirements. 1099FIRE is an employee-owned company located in Phoenix, Arizona.

If you have any questions or comments about our software, feel free to contact us at any time.

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