Instructions For Forms 1099-R And 5498 - Distributions From Pensions, Annuities, Retirement Or Profit-Sharing Plans, Iras, Insurance Contracts, Etc. And Ira Contribution Information - 2016 Page 7

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Medicare taxes. For losses on excess deferrals, see
You may report the distribution of elective deferrals
Losses below. See Regulations section 1.457-4(e) for
(other than designated Roth contributions) and employee
special rules relating to excess deferrals under
contributions (and earnings attributable to such elective
governmental section 457(b) plans.
deferrals and employee contributions) on the same Form
1099-R. However, if you made other distributions during
Excess contributions. Excess contributions can occur
the year, report them on a separate Form 1099-R.
in a section 401(k) plan or a SARSEP. All distributions of
Because the distribution of elective deferrals (other than
the excess contributions plus earnings (other than
designated Roth contributions) is fully taxable in the year
designated Roth contributions), including recharacterized
distributed (no part of the distribution is a return of the
excess contributions, are taxable to the participant in the
investment in the contract), report the total amount of the
year of distribution. Report the gross distribution in box 1
distribution in boxes 1 and 2a. Leave box 5 blank, and
of Form 1099-R. In box 2a, enter the excess contribution
enter Code E in box 7. For a return of employee
and earnings distributed less any designated Roth
contributions (or designated Roth contributions) plus
contributions. For a SARSEP, the employer must notify
earnings, enter the gross distribution in box 1, the
the participant by March 15 of the year after the year the
earnings attributable to the employee contributions (or
excess contribution was made that the participant must
designated Roth contributions) being returned in box 2a,
withdraw the excess and earnings. All distributions from a
and the employee contributions (or designated Roth
SARSEP are taxable in the year of distribution. An excess
contributions) being returned in box 5. Enter Code E in
contribution not withdrawn by April 15 of the year after the
box 7. For more information, see Rev. Proc. 92-93,
year of notification is considered a regular IRA
1992-2 C.B. 505.
contribution subject to the IRA contribution limits.
Similar rules apply to other corrective distributions
Regulations have not been updated for
under EPCRS. Also, special Form 1099-R reporting is
SARSEPs.
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available for certain plan loan failures. See section 6.07 of
Rev. Proc. 2013-12 for details.
CAUTION
Excess aggregate contributions. Excess aggregate
If excess employer contributions (other than elective
contributions under section 401(m) can occur in section
deferrals), and the earnings on them, under SEP,
401(a), section 401(k), section 403(a), and section 403(b)
SARSEP, or SIMPLE IRA plans are returned to an
plans. A corrective distribution of excess aggregate
employer (with the participant's consent), enter the gross
contributions plus earnings is taxable to the participant in
distribution (excess and earnings) in box 1 and 0 (zero) in
the year the distribution was made. Report the gross
box 2a. Enter Code E in box 7.
distribution in box 1 of Form 1099-R. In box 2a, enter the
excess and earnings distributed less any after-tax
Failing the ADP or ACP Test After a Total
contributions.
Distribution
Losses. If a corrective distribution of an excess deferral
If you make a total distribution in 2016 and file a Form
is made in a year after the year of deferral and a net loss
1099-R with the IRS and then discover in 2017 that the
has been allocated to the excess deferral, report the
plan failed either the section 401(k)(3) actual deferral
corrective distribution amount in boxes 1 and 2a of Form
percentage (ADP) test for 2016 and you compute excess
1099-R for the year of the distribution with the appropriate
contributions or the section 401(m)(2) actual contribution
distribution code in box 7. If the excess deferrals consist
percentage (ACP) test and you compute excess
of designated Roth contributions, report the corrective
aggregate contributions, you must recharacterize part of
distribution amount in box 1, 0 (zero) in box 2a, and the
the total distribution as excess contributions or excess
appropriate distribution code in box 7. However,
aggregate contributions. First, file a CORRECTED Form
taxpayers must include the total amount of the excess
1099-R for 2016 for the correct amount of the total
deferral (unadjusted for loss) in income in the year of
distribution (not including the amount recharacterized as
deferral, and they may report a loss on the tax return for
excess contributions or excess aggregate contributions).
the year the corrective distribution is made.
Second, file a new Form 1099-R for 2016 for the excess
contributions or excess aggregate contributions and
Distributions Under Employee Plans
allocable earnings.
Compliance Resolution System (EPCRS)
To avoid a late filing penalty if the new Form 1099-R is
The procedure for correcting excess annual additions
filed after the due date, enter in the bottom margin of Form
under section 415 is explained in the latest EPCRS
1096, Annual Summary and Transmittal of U.S.
revenue procedure in section 6.06 of Rev. Proc. 2013-12,
Information Returns, the words “Filed To Correct Excess
2013-4 I.R.B. 313, available at
Contributions.”
2013-04_IRB/ar06.html.
You must also issue copies of the Forms 1099-R to the
Distributions to correct a section 415 failure are not
plan participant with an explanation of why these new
eligible rollover distributions although they are subject to
forms are being issued. ADP and ACP test corrective
federal income tax withholding under section 3405. They
distributions are exempt from the 10% early distribution
are not subject to social security, Medicare, or Federal
tax under section 72(t).
Unemployment Tax Act (FUTA) taxes. In addition, such
Loans Treated as Distributions
distributions are not subject to the 10% early distribution
tax under section 72(t).
A loan from a qualified plan under section 401(a) or
403(a), from a section 403(b) plan, or from a plan,
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Instructions for Forms 1099-R and 5498 (2016)

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