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Form 1099-R: Passive Income Distributions

Find out more about Form 1099-R and how it‘s used to report distributions from your sources of passive income.

Did you receive $10 or more in distributions from one of the following types of passive income?

●     Profit-sharing or retirement plans

●     An individual retirement account (traditional IRA or Roth IRA)

●     Annuities, pensions, insurance contracts, and survivor income benefit plans

●     Permanent and total disability payments under life insurance contracts

●     Charitable gift annuities

If so, you should receive a Form 1099-R from your plan’s custodian by January 31st. This information is also furnished to the Internal Revenue Service (IRS). It’s important to contact the person identified on Form 1099-R by calling the telephone number provided to report any errors on the form as soon as possible to avoid filing an incorrect tax return.

Not all distributions are subject to tax

Whether you received $10 or more in distribution from a retirement plan, tax-deferred account, or another source of passive income, there is a possibility that it may not be subject to income tax. For example, a 401(k) rollover from one custodian to another (i.e., a direct rollover) would not be taxable to you.

What is reported on Form 1099-R?

Form 1099-R reports the gross distribution you received for the year, the amount that is taxable, the federal income tax that was withheld, and other important tax information.

Box 7 specifically provides a numbered or lettered code to identify the kind of distribution that you received. A table of the codes is included in the instructions for the 1099-R form.

What happens if I forgot to include Form 1099-R information in my tax return?

If you forgot to include the reported income or the tax withheld from a 1099-R form, you will need to file an amended return. It is important that your tax return matches the Form 1099-R the IRS receives from the plan’s custodian.

We Can Help

The tax preparers at KPMG Spark understand the many sources for passive income, the types of distributions that may occur, and whether or not they are taxable. Our managed, online bookkeeping with real-time support can help ensure the correct form is filed accurately and on time.

In addition to providing tax preparation that ensures your returns are compliant, KPMG Spark dedicated accountants provide year round support, data, and guidance from accountants dedicated to your small business’ success. You don’t have to tackle your tax preparation on your own. KPMG Spark can provide the bookkeepers and resources to support your business during tax prep and throughout the year. Contact KPMG Spark today and visit with an accounting specialist dedicated to your small to medium sized business success and tax preparation.

 

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP.

This blog article is not intended to address or provide advice concerning the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services.

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

KPMG SparkMarch 31, 2022Posted In: Tax Tips

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