If you have a retirement account, you are likely familiar with the term IRA form. IRA stands for individual retirement arrangement, and when IRA contributions are made, you receive a form 5498 from the IRS. The IRS form 5498 details the contributions that you made during that specific tax year and determines whether you will be paying taxes on the money or not.

The IRS form 5498 is issued to help individuals file their taxes successfully. This article will dive right into the details that surround form 5498 and help you understand everything about IRA accounts, including taxable income, traditional IRA contributions, a health savings account, and many more. To have a thorough understanding of IRA form 5498, we must first understand what is considered an individual retirement account.

What is an Individual Retirement Account?

As the name suggests, an individual retirement plan or account allows individuals to save money for retirement. You might be thinking, well, how is an individual retirement account different from a traditional savings account, and why shouldn’t you use your savings account for retirement? The main difference between a typical savings plan and a retirement plan is that IRA contributions have different advantages that may exempt you from having to pay taxes on the money that you are saving.

Another question you might be asking yourself is why you need to have a retirement account set up if you will be getting social security when you reach retirement age. While that may be the case, social security should not be your sole source of income. As a matter of fact, if you want to live comfortably, you should supplement your retirement plan by having multiple sources of income to live comfortably. Otherwise, you might find yourself scrambling in the future trying to afford the type of lifestyle that you want.

There are different types of retirement accounts. Anyone can open up a retirement plan and start saving towards retirement while also taking advantage of the different tax breaks that retirement plans get you. Some employers also give their employees an opportunity to open up a retirement account through them. This is because not only do you get tax advantages, but employers who offer an employer plan for retirement also get tax advantages. Let's explore some of the different retirement accounts available.

Traditional IRA

Traditional IRA contributions are one of the most common retirement plans available. They allow individuals to make a contribution deduction on their tax return, maximizing their potential savings. The money in the account then benefits from earnings and interest without having to be taxed immediately. Once the money is withdrawn during retirement, the taxes that they need to pay on their contributions will likely be a lot lower than if they were to pay taxes on it as earned income.

Roth IRA

Roth IRA contributions have already been taxed, and the money within them is growing tax-free. This allows individuals to withdraw the money once they reach retirement without having to worry about it becoming taxable income.

Rollover IRA

Rollover IRA contributions are those that are moved from certain retirement plans and into a traditional IRA account. Some common rollover accounts include 401-K, which are typically provided by employers for their employees. These 401-K plans can be rolled over into traditional IRA accounts.

Now that we understand the different retirement accounts and the effect that taxes have on them, we can take a look at IRS Form 5498.

What is the IRS Form 5498?

As previously stated, the IRS form 5498 has a clear breakdown of the contributions that you made to your retirement account. The institution that oversees your retirement account makes sure that the account holder gets form 5498 with the accurate information for the tax year. This form includes any tax-deductible contributions and other information that may be pertinent to the IRS in regard to your account.

Depending on the type of account that you have and are making IRA contributions to, your form 5498 may look different from others you may have seen before. This is because the form is personalized to you and your specific type of account as well as the IRA funds that you are placing in it.

According to TurboTax, box 1, for example, details the total amount of IRA funds contributed to your account. box 9 includes the amount that was matched by employee contributions on a SIMPLE IRA, while box 8 shows the amount of SEP IRA contributions. Finally, box 10 includes the amounts reported into your Roth IRA account.

Do I Need to File Form 5498 With My Taxes?

While Form 5498 includes vital information that you need in order to successfully file your taxes and attain a tax return if possible, you don't need to file it with your tax forms. Instead, you need the numbers and information that are on it so that you can accurately report your contribution deduction to the IRS.

Keep in mind that there is a tax filing deadline for filing all taxes. The deadline might change every year, but it is typically in April. Even though you are technically in a new tax year by then, you may continue to contribute to your IRA until the tax deadline, and those contributions will count towards the previous tax year. This option might be best for individuals who are trying to maximize their tax deductions.

If at any point you have any questions in regard to what you need from your form 5498 for tax reporting purposes, don't hesitate to contact a tax professional who can guide you through the entire process.

Do I Have to Deduct the Contributions on the IRA Form on My Taxes?

The IRS sets specific guidelines and limits for what needs to be deducted for any given tax year. For example, in 2023, the IRA contribution limits annually are $6,500 or $7,500 if you are over 50 years old. These contribution limits can change, so it is best to check your individual situation with a tax professional who can help you understand the specific limits you have.

In any case, if you don't have a retirement plan at work, your deduction is allowed in full for any given tax year by the IRS. This is different from traditional IRA contributions, though, where your spouse may have a retirement plan that is covered by their employer. Finally, Roth IRA contributions are not deductible.

In the event that you contribute more than the amount that the IRS allows you to deduct, you aren't taxed on that income, but you also aren't allowed to use it as a tax deduction.

Are There Different IRA Tax Forms?

Depending on the type of retirement account that you are the account holder for, you might realize that you receive different types of form 5498.

Form 5498

As we have previously discussed, form 5498 is used to report your IRA contributions to the IRS, including any required minimum distributions and fair market value amounts. This form is sent to you if you have a traditional IRA account.

5498-ESA

If you are a trustee of a Coverdell Education Savings Account, you will receive form 5498-ESA to report your contributions for the corresponding tax year.

5498-SA

If you hold a health savings account, medical savings account, or medicare advantage account, you will receive form 5498-SA, which details your contributions and anything that was reported to the IRS and that you may use as a tax deduction.

Frequently Asked Questions About Form 5498

Can I access my form 5498 online?

Depending on who your account holder is, you might be able to access your form and get a copy of it directly through an online portal. Contact your account holder for specific login details and for guidance about attaining your form 5498 online. In the event that you are unable to get your form online, remember that you will receive it in the mail.

What if I haven't received my form 5498?

In the event that you haven't received your form 5498, you can always call your account holder to make sure they have the accurate mailing address to which your form should be sent.

What does "fair market value" mean?

Fair market value refers to the value of your asset annually, in this case, the value of your IRA account. This is determined based on what an informed buyer is willing to pay for your assets. The IRS uses this figure to accurately tax your contribution.

When are 5498 forms usually issued?

The IRS requires form 5498's to be sent out no later than May 31 of each calendar year. While this may seem surprising because it is after the usual April tax filing deadline, the IRS does this because IRA contributions can be made up until the April deadline.

If I contribute to my retirement account this calendar year, does it count towards the previous tax year?

The IRS allows for contributions to be made for the previous calendar year for tax purposes up until the tax filing deadline in April. Doing this can get you plenty of tax breaks and advantages, so definitely consider this, as it might increase your tax return.

Conclusion

Navigating the retirement world can be overwhelming, and understanding the different forms that are associated with our IRA contributions can be confusing. It is always a great idea to seek tax advice from a professional who can help you better understand your options and make sure  you are on the right track. It is never too late to start saving for retirement.The sooner you start planning for it, the sooner you can take advantage of the tax breaks available for you, and the more prepared you will be for a comfortable life during retirement.

Invested Mom helps individuals like you understand everything there is to know about financials and helps you build financial literacy. In doing so, individuals learn to better manage their money without feeling overwhelmed while also making smart decisions about it. Learn everything there is to know about income, investing, and of course, retirement by signing up for Invested Moms course to gain valuable insights in regard to IRA tax forms and how to file your taxes correctly while making sure you maximize your contributions.