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.