How to Report Earnings From a 1099-R on Your Individual Tax Return

Working a lifetime should garner certain rewards, the biggest being retirement. Wise stewards of money build their retirement accounts over decades to ensure sufficient income when the productive years ebb. Nevertheless, income is income and thus is subject to taxation by the federal government.

Given the particular nature of outlays from pensions, annuities and individual retirement accounts, for example, the U.S. Internal Revenue Service (IRS) generates a special form for retirement and passive income. The 1099-R is specifically designed to work out annual passive revenue. It’s not the only 1099 tax form you might receive.

There are a host of different types of 1099 tax forms that the IRS may send you. From this document comes the figures that carry over to the 1040 tax return.

About the Form 1099-R

What is the 1099-R form used for? The 1099-R is sent out each year by the IRS to anyone who received a distribution from, as the heading on the form reads, “Pensions, Annuities, Retirement, or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.” It is one of a series of 1099 forms targeting dividends, interest and self-employment income, to name a few.

Recipients should get this document before ​Jan. 31​ of the year following the tax year. Accounting for the vast majority of distributions are rollovers from retirement accounts, payments from pension and annuity plans, loans disbursed against pensions and early withdrawals from retirement accounts.

Among its elements, the 1099-R has fields (boxes) for total distributions from an account, whether taxable or not. In addition, there is a box for just the taxable portion of the payout. Another field reports if any funds were withheld from the disbursement while still another box signifies the kind of distribution given, i.e. rollover, loan, death or withdrawal.

These figures are necessary for the taxpayer and the IRS to conclude what taxes have already been taken as opposed to what is due and payable. The accuracy of the 1099-R will, then, affect the correctness of the 1040.

What 1099-R Information Goes on the Tax Return?

So, where do I report 1099-R on the 1040? On the Form 1040, ​boxes 5a and 5b​ are where 1099-R information goes. The box numbers 1 and 2a correspond with 1040 ​boxes 5a and 5b​. These are components on the form that go toward determining what your taxable income is.

Do you have to pay taxes on a 1099-R? No. If, for instance, you were to receive regular distributions in a given year from a Roth IRA, where taxes were already paid on contributions, then line 5b would equal zero since no taxes apply to legitimate payouts. Other plans tax when monies are disbursed.

Does Every Retiree Get a 1099-R?

The Form 1099-R is not required of all retired persons. In fact, some need not even file a tax return. If, in some cases, Social Security is the sole source of income, there is no call to file with the IRS. Yet Social Security might be taxable if it is one of several revenue sources, as is the case with many seniors.

Furthermore, as noted above, Roth IRA account holders, though recipients of Form 1099-R, are spared any taxation on proceeds because they paid on the front end. It all depends on the nature of the retirement accounts.

Does the 1099-R Go to People Who Still Work?

Some seasoned employees accept retirement with one company and go on to work for another, even on a full-time basis. Doing so in no way forbids them from drawing on pensions, annuities or IRAs as long as they are in compliance with the rules. Actually, as people live and maintain working capacity longer, this arrangement becomes more common.