[9675]
February 12, 1998
TO: PENSION MEMBERS No. 11-98
PENSION OPERATIONS ADVISORY COMMITTEE No. 4-98
OPERATIONS MEMBERS No. 5-98
TRANSFER AGENT ADVISORY COMMITTEE No. 7-98
RE: IRS RELEASES FORM 1099-R AND FORM 5498 FOR 1998
______________________________________________________________________________
The Internal Revenue Service recently released Form 1099-R, Distributions from Pensions,
Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. and Form 5498, IRA
Contribution Information, for 1998. These IRS forms have been updated to include information
applicable to Roth IRAs and Education IRAs.
The instructions for Form 1099-R state that for distributions from Roth IRAs and Education
IRAs, the financial institution is not required to compute the taxable amount. The taxpayer is
responsible for computing the taxable amount on such a distribution. The instructions refer the
taxpayer to the instructions accompanying Form 1040 or 1040A regarding computing any applicable
taxable amount on a distribution from a Roth or Education IRA. In addition, the instructions state that
taxpayers who convert a traditional IRA into a Roth IRA in 1998 must include one-fourth of the taxable
amount in income for a period of four years (1998 through 2001). Taxpayers are referred to Form 8606
in order to calculate the taxable amount on such a conversion. Form 1099-R includes new distribution
codes with respect to Roth and Education IRAs. Code J represents a distribution from a Roth IRA in
the first 5 years. Code K represents a distribution from a 1998 Roth conversion IRA during the first 5
years. Code M represents a distribution from an Education IRA.
Form 5498 includes new boxes specifically for the Roth IRA and Education IRA. Box 3
indicates the amount converted from a traditional IRA or SEP to a Roth IRA in 1998. The instructions
remind taxpayers that they must include one-fourth of the taxable amount in income each year for four
years (1998 through 2001). Box 6 includes separate check-off boxes for the Roth IRA, Roth conversion
and Education IRA. Box 9 indicates the amount of Roth IRA contributions made in 1998 and through
April 15, 1999 for the 1998 calendar year. Box 10 indicates the amount of Education IRA contributions
made in 1998 on the taxpayer’s behalf. The instructions state that if the total amount of contributions
made to all of the taxpayer’s Education IRAs exceed $500 for 1998, the taxpayer should withdraw the
excess plus earnings generally by April 15, 1999. If the excess is not withdrawn in a timely manner, the
instructions indicate that the taxpayer may owe a penalty.
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Financial institutions must furnish Copy B of Form 5498 to the participant who has an
Education IRA by February 1, 1999. Financial institutions must furnish participants in all other types of
accounts with Copy B of Form 5498 by June 1, 1999. Copies of Form 1099-R and Form 5498, with
applicable instructions, are attached.
Kathryn A. Ricard
Assistant Counsel
Attachment