Function of Form 5498?

[zeros]

What is the function of form 5498?

[BP.]

I think among other uses, it helps IRA holders to determine their RMD's; it reports to IRS the contributions into IRA's, SEP's, etc. to match up with any deductions taken for the contributions; and I think the FMV info is useful for some 8606 entries.

[DaveO]

If I'm doing a tax projection for the next year the account balance will enable me to calculate the RMD. It's also nice to be sure older clients are getting the correct RMD to avoid penalties. With the consolidation in the financial services industry sometimes the trustees will "forget" to process the RMD.

[Mike Mac]

Form 5498

If a client has any basis in a traditional IRA it is essential to total up all those end-of-year values for each IRA, if the client took a distribution that year. The total is used as the denominator in the equation to figure how much of the traditional IRA is free from taxes.

Mike

[snowshine]

5498 allows the IRS to match Traditional IRA deductions claimed on tax returns with the amounts actually contributed to the account. It is not issed until May because taxpayers can still contribute to last year's IRA through April 15th, so they don't really know the answer until after that. I have had clients get letters because the amounts claimed as IRA deductions was more on the return than showed up on the 5498 and in 1 case, had the IRS send a letter asking if the taxpayer was making a non-deductible contribution or did they just forget to deduct the money!

The form is also used by the iRS to keep track of conversions, recharacterizations, FMV, etc.