Form 1099-R
Everyone receiving a minimum distribution of $10 from any retirement or profit-sharing, IRA, pensions, annuities, survivor income benefit plans, etc are served with Form 1099-R - Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contract etc. Some death benefit payments that are not part of a pension, retirement plan, profit sharing or disability payment from retirement plans and are made by employers are also reported on Form 1099-R. Worker’s compensation and Department of Veterans Affairs (VA) payments and the like are only reported on Form 1099-R if part of the distribution is subject to tax and another part nontaxable.
Box 1 - Gross Distribution. Displays the total amount of distribution received by the taxpayer in the present year. The amount may be a transfer, a direct rollover or a Roth IRA Conversion. The amount may also be a periodic payment, non-periodic payment or a total distribution. Box 1 amount flows into Line 4a or 4c of Form 1040.
Box 2a - Taxable Amount. Displays part of the distribution that is subject to tax. If the payer failed to determine the taxable amount, then there won’t be an entry in this box. It will therefore be up to the taxpayer to determine the taxable amount. In such a scenario, the maiden box in Box 2b must be checked. Normally, the amount of gross distribution reported on Box 1 of Form 1099-R will be subject to tax and will also be displayed in Box 2a. Direct rollovers, Qualified Charitable Distributions, qualified Roth Distributions, annuity payments in which the taxpayer made a contribution and any other already taxed amounts may make the amount in Box 2a being different. Check out Publication 575 - Pension and Annuity Income to be able to determine the amount subject to tax. Every amount entered in Box 2a will be flown to Line 4b or 4d of Form 1040.
Box 2b. This has two checkable boxes providing information about the distribution. Checking the first box means that the payer did not determine the amount subject to tax and Box 2a should be empty. Checking the second box means the distribution was a total distribution and the account was closed out.
Box 3 - Capital Gain. In this box, lump sum distribution received by the taxpayer from a qualified plan is reported. The taxpayer or the person they are benefiting from must have been born before January 2, 1936. They may also be able to choose to consider this amount as capital gain on Form 4972. Check out Form 4972 instructions. If it is a charitable gift annuity, you will be required to report it as a long term capital gain as instructed in the Instructions for Form 8949.
Box 4 - Federal Income Tax Withheld. Displays every federal income tax that is withheld when the taxpayer received the distribution.
Box 5 - Employee Contributions of Insurance Premiums. This normally displays, if any, the investment of the taxpayer in the contract (after contributions for tax) recovered tax free in the current year.
Box 6 - Net Unrealized Appreciation in Employer’s Securities. This shows that the taxpayer was served with a distribution of the securities (stock) of the employer, from a qualified pension plan. This amount is only included in Box 1. It stands for the appreciation in the stock value that happened from the time of the original contribution of stock.
Box 7. Shows the distribution code that identifies the kind of distribution received.
Box 9a. Shows the part of a total distribution that was sent to the taxpayer when the distribution was to many people.
Box 9b. Shows the total investment of the taxpayer, in a life annuity that is from a qualified plan. This amount is used in the calculation of the part of the distribution subject to tax. Check out Publication 575 - Pension and Annuity Income.
Box 10. To know how to report an amount that has been entered in Box 10, check out page 31 of Publication 575 - Pension and Annuity Income.
Box 11. Shows the year in which the taxpayer made the first contribution to a Roth account. This info is applied in the determination of whether income from a distribution is to get a 10% additional tax penalty for early withdrawal.
Boxes 12 to 17. Shows the state amounts that were withheld as well as every other part of a distribution reported to the state.
Some retirement distributions or payments given to a taxpayer by the IRA or from a retirement plan can be rolled over when you deposit the payment into a different retirement plan or IRA during the immediate 60 days after the distribution date. No tax is paid on the rolled over amount until it is withdrawn from the new plan. It is however mandatory that the distribution be reported on the tax return. Rollable distributions are referred to as “eligible rollover distributions.” For information on how to enter distributions in which part of or the entire distributed amount is rolled over into another IRA or retirement plan.
When a retirement distribution is not rolled over, it will be subject to tax as well as the 10% additional tax due to early distribution if at all the taxpayer is not yet eligible for the distribution or if they lack the exceptions to the 10% additional tax on early distributions.
Check out Publication 590-B - Distribution from Individual Retirement Plans to gather information on Roth distributions. Also check out The Simplified General Rule Worksheet in Form 1040 instructions for more information on how to enter the amount for distributions from annuities subject to tax.
To enter a distribution reported on Form 1099-R into the ProWeb:
- Go to the Federal Section of a tax return
- Proceed to the Income Menu
- Then to the IRA/Pension Distributions (1099R/ RRB, SSA)
- Add or Edit a 1099-R
- Enter the Name, Address and EIN of the Payer.
- Enter the Gross Distribution in Box 1 as it is displayed on the 1099-R
- Enter the amount subject to tax in Box 2a. In the event that the payer fails to determine this amount (or if the taxpayer’s determined amount and that of the payer are different) subtract any rollovers and qualified charitable distribution from the Gross Distribution in Box 1 then enter the difference in Box 2a for Taxable amount. To access the Simplified Method Worksheet, under the question “Do you need to calculate your taxable amount?” Click here for options.
- Enter every remaining item on the 1099-R. There will be no further action required after entering Distribution Code 7 or G in Box 7. If the Distribution Code is 1, you will be prompted to Select “Form 5329 Options” which is the penalty for early withdrawal. Option 2, "Transfer 1099-R Box 2a to Form 5329, Part 1, Line 1" should only be selected when there is an exception to the 10% additional tax on early distributions. The 10% penalty will be applied if the taxpayer failed to roll over the distribution or be eligible for an exemption.
- There is some information in the 1099-R that won;t be reported in the program. For entries, the ProWeb displays boxes 1-9 only.
Note: This is not tax advice. It is a guide on how to enter Form 1099-R into the Taxx Savage ProWeb.
Additional Information:
Publication 575 - Pension and Annuity Income
Publication 590-B -Distributions from Individual Retirement Plans
Additional Knowledge Base Resources (Distribution Codes - Box 7):
Code 3 - Disability - ProWeb - Form 1099-R - Distribution Due to Death or Disability
Code 4 - Death - ProWeb - Form 1099-R - Distribution Due to Death or Disability
Code G - Direct Rollover - ProWeb - Form 1099-R Rollover of Retirement Plan and IRA Distributions