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What Is a 1099-R Form?

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When tax season rolls around, your mailbox might fill up with W-2s and other forms that you’ll need to file your return. An Internal Revenue Service (IRS) Form 1099-R might be in the mix if you received certain types of income during the year. Knowing what a 1099-R form is for and when you might receive one can help ensure that your tax filing goes off without a hitch.

financial advisor can help you optimize a tax strategy for your financial needs and goals. 

What Is a 1099-R Form?

Form 1099-R is an official tax form that’s used to document certain types of income distributions. The IRS requires the entity that’s distributing the income to issue this form when the distribution is $10 or more.

When a 1099-R is required, the issuing entity must provide three copies of it. One copy goes to the person that received the income. Another copy goes to the IRS and the third goes to the appropriate state, city or local tax agency.

A 1099-R form is just one type of 1099 you might receive. Generally speaking, 1099 is used to report income that is received from an entity other than an employer.

For instance, you might receive a Form 1099-INT if you have interest income from a savings account or certificates of deposit (CD). If you freelance or do any type of gig work as an independent contractor, that income is usually reported on Form 1099-MISC. Wages, tips, salaries, commissions and other income earned from an employer, meanwhile, would be reported on a W-2.

What a 1099-R Form Is Used For

A woman itemizing receipts for her taxes.

Form 1099-R is used to record distributions of income, outside of income earned by working for an employer or from self-employment. There are a number of different types of income that can be reported on a 1099-R, including:

  • Distributions from profit-sharing plans or workplace retirement plans
  • Annuity distributions
  • Individual Retirement Account (IRA) withdrawals
  • Pension income
  • Retirement account rollovers

Form 1099-R can also be issued for other types of distributions.

For example, say you have a life insurance policy that includes a disability benefits rider. If you become permanently disabled and your policy pays out benefits to you as a result, those benefits would be reported on Form 1099-R.

It’s important to note that you’ll get a 1099-R for every plan that you take distributions from. So, if you withdraw money from your 401(k) and individual retirement account (IRA) in the same year that you also receive distributions from an annuity, you’d get one Form 1099-R for each distribution for a total of three.

Items Included In Form 1099-R

Like other official tax forms, Form 1099-R follows a standardized format. Entities that fill out this form are required to include certain pieces of information. And that starts with your name, address and taxpayer identification number. The form should also include the account number that you received a distribution, the date of payment and the payer’s information.

Following that, you should see a number of boxes that break down all of the relevant information the IRS needs to know about the distribution. Box 1, for example, shows the gross distribution from the plan that you received. Box 2a includes the taxable part of the distribution if the payer has that information.

In Box 3, you’ll see what portion of the distribution was allocated to capital gains. Box 4 includes any federal income tax that was withheld. Box 7 should tell you what type of distribution it is, which can help you figure out whether it’s taxable or not.

The IRS publishes a complete guide to Form 1099-R that you can use as a reference when filing your taxes.

What Should You Do If You Receive a Form 1099-R?

If you get a 1099-R in the mail, then you’ll need to file it with your taxes the same way you would any other 1099s or income statements you receive. That’s true even if the distribution is not taxable.

Remember, the IRS receives a copy of any 1099-Rs you receive. Leaving them out of your tax filing could raise a red flag and potentially lead to an audit.

When you file your taxes, you’ll just need to plug in the appropriate information from each box on Form 1099-R into your tax return. If you’re using an online tax software program to file, the program should prompt you as to what you’ll need to include.

Once you’ve entered all the details from your 1099-R forms, the software program can do the rest of the work. And it will calculate your tax liability for that income, if any. For example, a direct rollover from one traditional IRA to another isn’t taxable. But you’d still get a Form 1099-R that you’d need to include on your taxes.

What If You Get Form 1099-R In Error?

A woman reviewing instructions for Form 1099-R.

If you receive a Form 1099-R and weren’t expecting to, or the form you receive has an error, it’s important to contact the entity that issued it right away. They can either check their records to see if you were sent the form by mistake. Or they can issue a correct Form 1099-R that has the right information.

Including the wrong information from a 1099-R on your taxes could lead to problems. You could end up owing more in taxes than you’d planned or not paying enough. And that might lead to penalties later once the IRS discovers the mistake.

Likewise, it’s also a good idea to contact the entity that should have issued a Form 1099-R to you if you expecting one but didn’t receive it. For instance, if they had your old address on file, it’s possible that your form has gotten lost.

Bottom Line

Filing taxes can be a big enough headache as it is without adding in unfamiliar forms. If you’re planning a rollover of retirement funds, receive money from a life insurance policy or are set to retire, it’s important to know what that might mean for your filing. Understanding when you might be on the receiving end of a Form 1099-R can help you avoid any unintended missteps when reporting income on your taxes.

Tax Planning Tips

  • Consider talking to a financial advisor about fully incorporating tax planning into your personal financial planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Owing a lot in taxes at the end of each year is a stressor on anyone’s wallet. In that case, you may want to adjust the withholding amounts on your W-4. This can help budget better throughout the year. And it will help you pay less in taxes when April rolls around.

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