At the start of tax-filing season, the managers of profit-sharing plans, IRAs, pensions, annuities and insurance contracts report the payments they made to you the previous year on IRS Form 1099-R. To transfer the information to your tax return correctly, you need to understand the information contained in its boxes.
Read the Instructions
Form 1099-R includes instructions to the recipient. In addition to a brief discussion about the different investment plans for which information is reported, the short guide describes the data in each of the form's boxes. In the 2011 version of the 1099-R, Box 1 shows the total payments you received from the given fund, for example, and Box 2 indicates how much is taxable. Read the 1099-R instructions before you prepare your tax return.
Identify the Payer
An entire year may have passed since you got your distribution, or you may have gotten more than one payment from different institutions. If you cannot readily tell who sent you the 1099-R in your hand, read the name that appears in the top-most box on the left side of the form. The space is reserved for the payer’s name and its address.
Mind the X
You may see an "X" in three different areas of Form 1099-R. A checkbox is at the very top with the words “Corrected (if checked)” next to it. A checked box indicates that the information in a previous 1099-R sent to you concerning the same distribution was amended. Use the revised form to prepare your tax return. If you already submitted it, you may have to file IRS Form 1040X to amend it. An accountant is the best person to sort the situation for you. In 2011, Box 2b of the 1099-R also has two checkboxes. The financial institution making the payment checks the first one to tell you it was unable to figure out the taxable portion of your distribution. It marks the second checkbox to indicate that the payment you received was for the entire balance in your account. When the distribution is from a traditional IRA, SEP or SIMPLE plan, you will see an "X" in the checkbox in box 7.
Refer to the Code List
The 1099-R uses a series of codes to indicate which type of distribution you received. In 2011, the codes are used in box 7, where the payer types the appropriate letter or number. The included instructions to the recipient list their meaning. The number "3" inside box 7, for example, shows that you were eligible for the payment because of a disability. A "4" indicates that you qualified for the distribution as a beneficiary of the deceased accountholder.
Box 4 shows any federal tax that the payer withheld for the IRS from your gross distribution. Box 12 displays the amount of state and local taxes deducted from your payment. Report the federal taxes you paid on Form 1040. Find out from your state’s revenue department whether and how to also claim the state taxes you paid on your distribution in your state tax return.
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