A 1099 is an Internal Revenue Service form used to report income not covered in a W-2 wage statement. It reports such things as dividends, interest, miscellaneous pay from freelance work or self-employment, or distributions from retirement accounts. An administrator of any annuity, retirement, profit-sharing or similar account is required to report distributions of more than $10 on a 1099-R by Feb. 1 for the tax year just ended.
IRS Gets 1099-R
One copy of each 1099-R goes to the IRS, another to the taxpayer. Taxpayers must report all distributions of retirement or other income on the 1099-R on their IRS Form 1040 tax return. A copy of the 1099-R must be attached to the return if any federal income tax was withheld. That will be shown on Box 4 of the 1099-R. A taxpayer is obligated to report retirement income, however, whether or not a 1099-R is issued.
A 1099-R shows the name and identification number of both the payer and the recipient. The first four boxes are the key ones. Box 1 shows the total distribution from the retirement or other account. Box 2a shows the taxable amount, while Box 2b is checked if the payer can't determine the taxable amount; a check in the "total distribution" part of that box shows if Box 1 is the complete amount. Box 3 shows any capital gains included in the distribution and Box 4 reports tax withholding.
Box 7 explains the type of distribution with number and letter codes. These cover such things as normal distributions, payments due to death or disability, tax-exempt Roth distributions, charitable gifts and various exceptions for such things as hardship withdrawals due to high medical expenses or higher education expenses.
Other boxes on the 1099-R show the employee's total contributions, whether or not they are to taxable Roth accounts and such things as state and local taxes withheld from distributions. A taxpayer may get a 1099-R even if a retirement account is being rolled over into another plan. An exception is a direct transfer from one account trustee to another without account holder involvement.
Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.