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Receiving an unexpected tax form can be confusing at best and downright scary at worst.
Luckily, the 5498 tax form isn’t anything you need to be afraid of. In fact, it’s a good thing to get this form. It generally means you saved money in an IRA during the previous year — a positive step toward building your retirement fund.
Still, your savings could have tax implications, so the IRS wants to know about them. That’s where the 5498 tax form comes in. It’s used to report various IRA accounting bits. Let’s look at the information included on the form and what you should do if you receive one.
- What is a Form 5498?
- Why did I get a Form 5498?
- What information is on a Form 5498?
- What should I do with my Form 5498?
What is a Form 5498?
You can think of Form 5498 as a sort of report card for your IRA accounts. Just like how your school used to create a report card and send it to your parents, your IRA firm is supposed to report the status of your IRA accounts to the IRS using Form 5498. In this case, you don’t get a “grade” (whew!) — but instead, this form is a way for your IRA firm to tell the IRS what you’ve been doing with your account.
Your IRA firm is actually supposed to fill out two copies of the 5498 tax form. It should send Copy A to the IRS, and Copy B to you, to keep for your records. If you have IRAs with more than one firm or more than one IRA with the same firm, you’re supposed to receive a 5498 tax form for each IRA. Your IRA firm is required to send in this form by June 1 of each tax year.
Why did I get a Form 5498?
If you’re still in your working years, chances are you received a Form 5498 because you contributed to your IRA at some point during the year. High five — that’s a good thing! The 5498 tax form is used to report contributions to your Roth IRA, traditional IRA, SEP IRA and/or SIMPLE IRA accounts.
But Form 5498 also details a few other transactions you might make throughout the year with your IRA, including the following:
- Doing a Roth IRA conversion
- Rolling over an old retirement account into your current IRA account
- Recharacterizing contributions
In addition, if you’re a bit older, this form might include information about required minimum distributions — or RMDs — including the RMD date and amount. Once you reach a certain age, federal law requires you to withdraw a minimum amount from certain types of IRAs each year. For most people, RMD rules kick in at age 72. But if you reached age 70 1/2 before Jan. 1, 2020, you’ll be required to take distributions now.
It’s worth noting that if you have distributions of more than $10 from an IRA, the trustee is also supposed to file a Form 1099-R and send copies to the IRS and you. You may have to attach the form to your tax return.
What information is on a Form 5498?
The 5498 tax form might look more official than your old school report card, but it’s not too complicated. On the left side, you’ll see your personal information, account information and information for the IRA trustee or issuer. On the right, you’ll see your actual IRA information listed. We’ll break it down line by line.
Box 1: IRA contributions
Though it’s not specified, Box 1 is actually used to report any traditional IRA contributions. This is a particularly important number to pay attention to because depending on what other types of retirement accounts are available to you, you may be able to deduct this amount on your tax return. But take note: If you or your spouse put money into an employer’s pension plan, these contributions to a traditional IRA may not be deductible.
Box 2: Rollover contributions
Just like the name implies, this box is used to report any rollovers you may have done during the year, like rolling over a retirement account from an old employer into your traditional IRA. Don’t include any IRA conversions here. They go in a different box.
Box 3: Roth IRA conversion amount
Roth IRAs have a lot of advantages, but sometimes you might earn too much money to qualify to contribute to them. In that case, you can do a so-called “backdoor Roth” where you convert money from a traditional IRA into a Roth IRA. If you opt for this (legal) shell game, this is where you’ll see it reported.
Box 4: Recharacterized contributions
If you need to shuffle money between your IRAs (such as from a Roth IRA to a traditional IRA) for any reason, this is where it’ll be reported.
Box 5: FMV of account
“FMV” stands for “fair market value.” This box notifies the IRS of how much your IRA is actually worth on the date the form was issued.
Box 6: Life insurance cost included in Box 1
If you paid premiums for life insurance last year, you may have calculated your IRA deduction by subtracting part of those premiums from the amount you’re allowed to contribute to your IRA. If that’s the case, the amount to subtract appears in this box.
Box 7: IRAs checkbox
This is a simple checkbox that may show which types of IRA accounts are reported on this form. For example, if you only have a SEP IRA and a Roth IRA, you’ll see those two account types checked in this box.
Box 8: SEP contributions
If you have a SEP IRA, the total amount of contributions made to your account last year will be reported in this box. If an employer made these contributions, you can’t deduct them on your federal income tax return. But if you made the contributions as a self-employed person (or partner), you may be able to deduct them.
Box 9: SIMPLE contributions
Similarly, if you have a SIMPLE IRA, any contributions will be noted in this area. And the same limitation applies — these contributions may only be deductible if you made them as a self-employed person or partner.Learn about self-employed retirement plans
Box 10: Roth IRA contributions
Again, just like it sounds, any contributions you made to your Roth IRA account (if you made any) will show up in this box. You can’t deduct these contributions on your tax return.
Box 11: RMD checkbox
If this box is checked, you’ll have to take an RMD from a retirement account, such as a traditional IRA, the following year. You may also be required to take an RMD next year even if this box is not checked. Failing to do so could mean having to pay a 50% excise tax on the amount you didn’t take as a distribution. You can find more details on this in IRS Publication 590-B.
Box 12: RMD information
If Box 11 is checked, this is where you’ll find the information about how much to take out and when. Box 12b will tell you how much you need to take out, and Box 12a will tell you the deadline for withdrawing it. If you don’t withdraw the specified amount by the deadline date, you will have to pay a hefty penalty tax — 50% of the amount not withdrawn.
Box 13: Postponed/late contribution information
Sometimes it’s possible to make a contribution to your IRA from a different tax year. For example, let’s say you’re filling out your 2019 tax return in 2020, and you want to make sure to max out your retirement accounts. Your accountant might notify you that you can still contribute some cash to your retirement accounts for 2019 before the IRA contribution deadline, and if so, those contributions will be noted here.
Box 14: Repayment information
Occasionally, the government lets you withdraw money from your IRA if you’re facing a hardship situation. This might happen, for example, if you’re in the military reserve and you get called up for duty — the so-called “qualified reservist” exception. So you don’t lose out on that opportunity to save, the IRS lets you repay those distributions you withdrew. If you took advantage of this opportunity, you’ll see those numbers reported here.
Box 15: FMV of certain specified assets information
Many people just invest in the stock market through individual stocks, index funds and mutual funds for their IRAs. But if you have some other type of investments, such as real estate, nontradeable option contracts or ownership of another business, those will be reported here.
What should I do with my Form 5498?
Technically, there isn’t anything you need to do with this form. You don’t need to file it because the firm holding your IRA already did that.
Still, it’s a good idea to check and make sure the numbers reported on the Form 5498 match up with the numbers you put on your tax return. If there’s a difference, you may need to file an amended return. The IRS also recommends keeping the form for your records until “all distributions are made” — which might be for a long time if you’re still far from retirement.
Getting a 5498 tax form in the mail is more of an accounting obligation than anything. Still, it’s a good idea to give it a once-over and check that the numbers on the form agree with information you reported on your tax return, especially if you deducted any of your IRA contributions.
Once that’s done and you’ve filed away the form, you can turn your attention to the important goal of saving even more money next year toward your retirement.
Jennifer Samuel, senior tax product specialist for Credit Karma Tax®, has more than a decade of experience in the tax preparation industry, including work as a tax analyst and tax preparation professional. She holds a bachelor’s degree in accounting from Saint Leo University. You can find her on LinkedIn.