When you take a withdrawal from your IRA account, it is important that you keep records so you can accurately file the information with the IRS. Even if all or a portion of your withdrawal is not taxable, you are still required to inform the IRS of your transaction. Financial services firms are required to send you a report known as a 1099-R at the end of the calendar year outlining all of your distributions. From there, it is a simple process to report the withdrawal to the IRS.
Things You'll Need
- IRA account statement
- Personal information
Collect any 1099-R forms you have received. Financial services firms are required to issue a 1099-R for each IRA account from which you have made a withdrawal, and they report this information to the IRS as well. You are still required to make your own filing, however, so retain these forms as you receive them.
Verify that the information on the 1099-R you receive matches your personal records. Occasionally, errors are made, and it is important that you report the correct amount of your withdrawal.
Determine the amount of the distribution that is taxable. Your 1099-R should include a box showing you the taxable amount. If not, contact your financial or tax adviser, or refer to the federal filing instructions for Form 1040 to determine this amount.
Enter the amount of the withdrawal on Line 15 of your federal form 1040. Line 15a should show the total amount of the distribution, and Line 15b is for the taxable amount of the distribution, if any.
Complete Form 5329 to determine if any penalty taxes are due. If you are older than 70½ and have withdrawn less than the required minimum distribution, or if you are younger than 59½ at the time of the distribution, you may owe a penalty tax. If a penalty tax is due, enter the amount on Line 58 of your federal form 1040, according to the instructions on Form 5329.
Tips & Warnings
- IRS contribution and withdrawal rules are complex, and severe penalties may result from improperly interpreting them--you may want to consult a tax adviser.
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