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Question: My client received a Form 1099 and Form 5498 from her IRA custodian last year. What’s up with the two forms?
Answer: The IRA custodian is required to file Form 5498 with the IRS every year that the IRA exists. The custodian only issues a Form 1099 to the taxpayer and the IRS when there is a distribution from the IRA.
Copies of Form 1099 are required to be sent to the taxpayer by the end of January following the calendar year of distribution, and to the IRS by the end of February.
The IRA custodian must issue Form 5498 by May 31st after the calendar year for which it is filed.
There may be inconsistencies between what is reported on Form 5498, and what the taxpayer reports on her income tax return. For example, in the case of a traditional IRA, contributions made between April 16th and December 31st of a calendar year are assumed to be contributions made for that calendar year. On the other hand, traditional IRA contributions made between January 1st and April 15th may be either a contribution for that calendar year or the prior calendar year. The taxpayer must indicate on the form submitted to the IRA custodian to which year the contribution applies. That isn’t always done perfectly, and may cause an inconsistency between Forms.
Likewise, SEP contributions for 2011 can be made as late as October 15, 2012. However, since Form 5498 for 2012 must be filed by May 31st, it won’t show 2011 SEP contributions made late in 2012.
In many cases, the deduction taken on the tax return and the number indicated on the Form 5498 for that year may not agree. The client will just have to take it on faith that the CPA or other tax preparer will report the correct deduction amount in the appropriate year and it won’t cause a problem.
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