January 2011

Final Review 2012 Form 5498

1. On the bottom left there is an “Account Number”box. The IRA custodian is required to insert an account number in this box when filing more thanone Form 5498 for the same person. If your institution wants to earn some bonus points with the IRS,you will complete this box even though it is not required. A unique number should be used. Using such a number helps the IRS to process corrected information accurately. The account number may be a checking or savings account number or some other unique number with respect to an individual. The number must not appear anywhere else on the form (i.e. it cannot be the social security number
2. In Box 7 only one of the 4 boxes must be checked to indicate the type of IRA. A person who has a traditional IRA, SEP IRA and Roth IRA would need to be furnished three 5498 forms
3. Box 1. IRA Contributions (other than amounts in boxes 2-4, 8-10, 13a and 14a). Enter the amount of the annual contributions made on or after January1, 2012 through April 15, 2013 as designated for 2012. The IRA custodian is to report the gross amount of the annual contributions even if such contributions are excess contributions, or will be later recharacterized. These are still to be reported
4. A traditional IRA contribution, which is not properly reported in one of the other traditional IRA boxes as discussed below, is to be reported in box 1. For example, if a person tries to roll over $28,000, but does so on day 70 and the IRA custodian learns of this fact prior to filing the current year’s Form 5498, then the IRA custodian must report this $28,000 in box 1. This same procedure would apply if somehow non-IRA funds had been mistakenly transferred into an IR
5. Box 2. Rollover Contributions. Enter the amount of the rollover contributions made on or after January 1, 2012 through December 31, 2012. Made means received by the Traditional IRA custodian. Also, enter those contributions which are treated as a rollover contribution (i.e. direct rollover). A rollover may either be an indirect rollover or a direct rollover. An indirect rollover means the paying plan (could be an IRA or an employer plan) issues the distribution check to the individual who then makes a rollover contribution by the 60 day deadline. A 60 day indirect rollover may occur between two traditional IRAs, two SEP-IRAs, or between a traditional IRA and a SEP-IRA or vice versa. Remember that nonspouse IRA beneficiaries are ineligible to roll over a distribution from one inherited IRA and redeposit it into another inherited IRA. A direct rollover occurs when an employer plan issues the check to the IRA custodian on behalf of the individual. By definition, a direct rollover cannot occur between IRAs. Employer plan means a qualified plan, section 403(b) plan or a governmental section 457(b) plan. The funds attributable to a nonspouse beneficiary of such plans are eligible to be directly rollover to an inherited IRA and would be reported in Box 2
6. Box 3. Roth IRA Conversion Amount. This box will be completed when a conversion contribution is made to a Roth IR
7. Box 4. Recharacterized Contributions. The IRSinstructions are very brief, “Enter any amounts recharacterized plus earnings from one type of IRA to another.” If a person had made either an annual contribution or a conversion contribution to a Roth IRA in either 2011 and/or 2012, he or she may elect to recharacterize it as adjusted by earnings or losses to be traditional IRA contribution in 2012. The total amount recharacterized is to be reported in box 4. Although the IRS instructions use the term, “plus earnings”, the IRS should use the term, “plus or minus earnings or losses.
8. Box 5. Fair Market Value of Account. The IRSinstructions for this box are also very brief, “Enter the FMV of the account on December 31.” The IRS added a caution to self-directed and trust IRAs as follows: “Trustees and custodians are responsible for ensuring that all IRA assets (including those not traded on established markets or with otherwise readily determinable market value) are valued annually at their fair market value.” The instruction to report the FMV as of December 31 applies whether there is a living IRA accountholder or an inheriting IRA beneficiary. If the IRA accountholder or inheriting beneficiary is alive as of December 31, the individual closed his or her IRA during the year by taking a total distribution and he or she made no “reportable contribution”, then the IRA custodian is not required to prepare and file the Form 5498. However, if the IRA accountholder or inheriting beneficiary died during the year, the IRA custodian will need to prepare a final Form 5498 for the deceased IRA accountholder or inheriting beneficiary as discussed below.With respect to a deceased accountholder or a deceased inheriting IRA beneficiary, the IRS gives the IRA custodian two options. Option #1 - report the FMV as of the date of death. Option #2 - report the FMV as of the end of the year in which the decedent died. This alternate value will usually be zero because the IRA custodian will be reporting the end of year value on the Form 5498’s for the beneficiary or beneficiaries. If Option #2 is used, the IRA custodian must inform the executor or administrator of the decedent’s estate of his or her right to ask for the FMV as of the date of death. If the IRA custodian does not learn of the individual’s death until after the filing deadline for the Form 5498 (i.e May 31), then it is not required to prepare a corrected Form 5498. However, an IRA custodian must still furnish the FMV as of the date of death if requested to do so
9. Box 6. Life Insurance cost included in box 1. An IRA custodian will normally leave this box blank or will insert a 0.00 since it is only to be completed if there was a contribution to an IRA endowment contract as sold by an insurance company a long time ag
10. Box 8. SEP Contributions. Any SEP contributions made to the IRA custodian during 2012 are to be reported in box 8. Such contributions could have been for 2011 or 2012
11. Box 9. SIMPLE Contributions. Any SIMPLE-IRA contributions made during 2012 are to be reported in box 9. Such contribution could have been for 2011 or 2012
12. Box 10. Roth IRA Contributions. Any Roth IRA contributions for 2012 are to be reported in box 10 as long as made between January 1, 2012 and April 15, 2013
13. Box 11. Check if RMD for 2013. An IRA custodianis required to check this box if the IRA accountholder attains or would attain age 70½ or older during 2013. The instructions do not discuss whether or not this box is to be checked for an inheriting traditional IRA beneficiary. It should not be checked for an inherited IRA. Completing this box is necessary only if the IRA custodian is required to prepare a 2012 Form 5498 for a person. This box is not checked with respect to an individual who died during 2012 and who would have attained age 70½ or older during 2013 had he or she lived
14. Boxes 12a (RMD date) and 12b (RMD Amount). An IRA custodian’s use of these two boxes is optional, it is not mandatory. Under current IRS procedures, the IRS does not require the traditional IRA custodian to furnish it with the RMD amount. The law is unsettled whether or not the IRS has the legal authority to require that an IRA custodian furnish the RMD amount. Since the IRS would like to be furnished this information, the IRS has added boxes 12a and 12b to the Form 5498. The approach adopted by the IRS is that a traditional IRA custodian by completing boxes 11, 12a and 12b on the Form 5498 and furnishing it to the IRA accountholder will meet the requirement that it must furnish a RMD Notice by January 31. The IRS instructions do permit the IRA custodian to furnish a separate Form 5498 with the only information being furnished is the information for boxes 11, 12a and 12.
15. Box 13a. Postponed contribution(s). Since we arediscussing completing the Form 5498 for a traditional IRA, we will discuss what needs to be done for postponed contributions to a traditional IRA. The individual will instruct you on an IRA contribution form the “prior” year or years for which he or she is making the postponed contribution(s). The individual must designate the IRA contribution for a prior year to claim it as a deduction on the income tax year. Postponed contributions may be made by individuals who have served in a combat zone or hazardous duty area or individuals who are “affected taxpayers” due to federally designated disasters. If the IRA custodian will report the contribution made after April 15 and the individual designates a contribution for a prior year, then the IRA custodian must prepare either (1) a Form 5498 for the year for which the contribution was made or (2) on a Form 5498 for a subsequent year. Under approach #1, the IRA custodian may choose to report the contribution for the year it is made. For example, if an individual in September of 2012 designated a contribution of $5,000 to a traditional IRA for 2010. The IRA custodian could choose to prepare a 2010 Form 5498 and report the $5,000 contribution in box 1. If the IRA custodian had not prepared a 2010 Form 5498 for this individual, the IRA custodian then would prepare an original 2010 Form 5498. If the IRA custodian had previously prepared a 2010 Form 5498 for this individual, the IRA custodian then would prepare a “corrected” 2010 Form 5498. Under approach #2, if the the IRA custodian is furnished a contribution after April 15, the IRA custodian may choose to report it on that year’s Form 5498. The amount of the contribution must be reported in box 13a and the year for which the contribution was made in box 13b and in box 13c the applicable code as follows: AF - Allied Force EF - Enduring Freedom or IF - Iraqi Freedom FD - Affected taxpayers of designated disaster area. Definition. An individual who is serving in or in support of the Armed Forces in a designated combat zone or qualified hazardous duty area has an additional period after the normal contribution due date of April 15 to make IRA contributions for the prior year. The period of time is the time the individual was in the designated zone or area plus at least 180 days
16. Box 14a. Repayments. A traditional IRA accountholder who has taken a distribution under special disaster rules or who has taken a qualified reservist distribution is eligible to repay the distribution even though such repayment does not qualify as a rollover. Enter the amount of the repayment(s). Box 14b. Code. Enter the applicable code for the type repayment(s): QR - repayment to a qualified reservist DD - repayment of a federally designated disaster distribution. Note that repayments only have one reporting procedure whereas postponed contributions have two reporting procedures
17. Duty To Prepare/Furnish Corrected Form 5498. An IRA custodian is required to prepare a corrected form 5498 as soon as possible after it learns there is an error on the original form as filed. The IRS furnishes the following example. “If you reported as rollover contributions in box 2, and you later discover that part of the contribution was not eligible to be rolled over and was, therefore, a regular contribution that should have been reported in box 1 (even if the amount exceeds the regular contribution limit), you must file a corrected For 5498.