No Video or Audio Recording is permitted without prior written consent from Collin W. Fritz & Associates, Ltd.

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1 Copyright 2014 Collin W. Fritz & Associates, Ltd. The Pension Specialists All rights reserved. No part of this presentation may be reproduced in any form and by any means without prior written permission from Collin W. Fritz & Associates, Ltd. Rev

2 No Video or Audio Recording is permitted without prior written consent from Collin W. Fritz & Associates, Ltd.

3 The Audio portion of this presentation is available either by phone or by using the speakers and microphone on your PC. The phone number is provided to you in the confirmation from CWF and again at the time you join the meeting. You will need the access code that was ed to you in the confirmation from CWF. The confirmation code is 9 digits in length e.g You will also need the Audio Pin # which is shown to you at the time you join this meeting If you need assistance re-connecting please call CWF at

4 Distributions Permissive Mandatory Withholding Tax Penalties Preparation of 2014 Form 1099-R 4

5 5

6 Distributions Why are distributions reportable on the Form 1099-R? Encourages individuals to report such distributions on the federal income tax returns Informs the IRS of the distributions and allows the IRS to see if the individual is properly reflecting the distribution on his/her tax return and paying the proper amount of income tax 6

7 Form

8 Form

9 Form

10 IRS Form 1099-R 10

11 2014 IRS Form 1099-R Due Dates in 2015 January 31 February 28 28/29 March 31 IRA Owner / Beneficiary IRS IRS Electronic Discussed Later Deadlines to correct form 1099-R to qualify for reduced penalty. 11

12 Traditional and Roth IRA Reporting CWF s IRA Distribution Form CWF #57 Source of Information Distribution Reason Amount Withholding 12

13 CWF s Roth IRA Distribution Form CWF #57R 13

14 1. IRA Extends pilot or Trial Truncation Program. Use is optional. Applies to Accountholder copy. 2. Identity Theft Concerns 14

15 IRS Form 1099-R Unique Account Number

16 IRS Form 1099-R Unique Account Number Requirement Account Number The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 1099-R. Also needed if only one IRA, but different reason codes apply to the distributions. Additionally, the IRS encourages you to designate an account number for all Forms 1099-R that you file. See part L in the 2011 General Instructions for Certain Information Returns IRS Recommendation Should not be variations of SSN Purpose Allows for the IRS to quickly process (and understand) the correction of a previously filed form. 16

17 Distributions General Rule: Box 1 and Box 2a are completed with the same amount then box 2b is checked 2011 and subsequent year procedures Distributions do not distinguish if the distribution is comprised if deductible or non-deductible contributions. The individual must aggregate all traditional, SEP, and SIMPLE IRAs in applying the distribution rules. 17

18 IRS Form 1099-R Box 1 - Gross Distribution Box 2a - Taxable amount Box 2b - Taxable amount not determined Must generally be checked for Traditional and Roth IRAs X /7/4 X 18

19 IRS Form 1099-R - Standard Roth X Q/T/J 19

20 IRS Form 1099-R Box 1 - Gross Distribution Box 2a - Taxable amount Box 2b - Taxable amount not determined Must generally be checked for Traditional and Roth IRAs Why? X For the traditional IRAs the unknown is whether the individual has made nondeductible contributions to any of his/her IRAs. For Roth IRAs - the unknown is whether the individual has other Roth IRAs. 20

21 Distributions IRS Form 1099-R Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA, Insurance Contracts, etc. Box 2a Taxable amount Exceptions include Corrections of excess contributions with earnings interest in Box 2a IRA Recharacterizations - $0.00 in Box 2a Direct Rollover/Transfer of 401(k) Plan - $0.00 in Box 2a Revocations and Closures Improper SIMPLE to Traditional IRA transfer Correction of excess contributions with no earnings Note: Current Year Contributions are considered excess contributions for purpose of preparing Form 1099-R 21

22 IRS Form 1099-R Gross BEFORE Withholding, Net AFTER Fees and Penalties Gross distributions means the amount received or deemed received by the recipient 22

23 IRS Form 1099-R Box 2a Taxable amount (Generally the same amount as in Box 1) 23

24 IRS Form 1099-R Box 1 Gross Distribution Box 2a Taxable amount Usually the same as Box 1 for Traditional, SEP, and SIMPLE IRAs Usually Blank for Roth IRAs 24

25 IRS Form 1099-R X Box 2b Taxable amount not determined. Must generally be checked for Traditional and Roth IRAs. 25

26 IRS Form 1099-R X Box 2b Taxable amount not determined. Total Distribution IRA Balance is ZERO on December 31 26

27 IRS Form 1099-R Box 3 Capital gain (included in box 2a) NOT used for IRAs 27

28 IRS Form 1099-R Box 4 Federal income tax withheld Complete when applicable 28

29 Illustration of Federal Withholding IRA Owner Only Correct Method X Correct Example 1 X IRA Owner requests $10,000 from his traditional IRA with Federal Income Tax Withholding of $2,000. The IRA Owner is age 50. The IRA Custodian issues a check for $8,

30 IRS Form 1099-R Box 5 Employee contributions/designated Roth contributions or insurance premiums NOT used for IRAs 30

31 IRS Form 1099-R Box 6 Net unrealized appreciation in employer s securities NOT used for IRAs 31

32 IRS Form 1099-R Box 7 Distribution Codes Concept of the Codes The IRS wants the IRA custodian to help the IRS determine if the recipient owes the 10% additional tax. 32

33 CWF Form # 57 Traditional IRA Distribution Form 33

34 The Withdrawal Rules and Box 7 What are the exceptions to the 10% additional tax? A person will not owe the 10% additional tax if he/she is in one of the following situations. Refer to IRS Publication 590 for an explanation of the exceptions. IRS Expectations The IRA custodian is to determine in some cases if the individual is eligible for the exception. In many cases, the individual will need to claim the exception on his/her tax return You convert to amount to a Roth IRA You have unreimbursed medical expenses that are more than 7.5% of the adjusted gross income The distributions are not more than the cost of your medical insurance when you are unemployed You are disabled You are the beneficiary of a deceased IRA owner You are receiving periodic distributions over a term equal to your life expectancy 34

35 The Withdrawal Rules The distributions are not more than your qualified higher education expenses You use the distributions to buy, build, or rebuild a first home The distributions is a qualified reservist distribution The distribution is of contributions returned before the due date of your tax return The distribution is due to an IRS levy 35

36 Codes used for IRAs, Pensions and Annuities 36

37 Codes used for IRAs, Pensions and Annuities 37

38 Codes used for IRAs, Pensions and Annuities 38

39 IRS Form 1099-R X X Code 1: Early Distribution, no known exception (or exception to be claimed by individual) Has not attained age 59½ 39

40 IRS Form 1099-R Distribution Codes Code 1 Early Distribution, no known exceptions (or exception to be claimed by the individual): Qualified Medical Expense Higher Education Expense Certain Qualified Hospitalization Premiums 1 st Time Home Purchase Qualified Reservist Distribution (IRA Accountholder completes IRS Form 5329 with Form 1040) 40

41 IRS Form 1099-R Distribution Codes Code 1 Early Distribution, no known exceptions (or exception to be claimed by the individual): Qualified Medical Expenses Expenses must qualify as an itemized deduction if the IRA Owner was itemizing (For Self, Spouse, Dependents) 41

42 IRS Form 1099-R Distribution Codes Code 1 Early Distribution, no known exceptions (or exception to be claimed by the individual): Higher Education Expense Tuition, fees, books, supplies, and equipment required for the enrollment or attendance at an eligible educational institution. Room and board are included for half-time students. (For self, spouse, children, grandchildren) 42

43 IRS Form 1099-R Distribution Codes Code 1 Early Distribution, no known exceptions (or exception to be claimed by the individual): Hospitalization Premiums Unemployment for at least 12 consecutive weeks, distribution must be during year of unemployment or subsequent year and not later than 60 days after begin re-employed. (For self, spouse, dependents) 43

44 IRS Form 1099-R Distribution Codes Code 1 Early Distribution, no known exceptions (or exception to be claimed by the individual): 1 st Time Home Purchase Must have no ownership in principal residence for 2 years, $10,000 lifetime limit. (For self, spouse, children, grandchildren, ancestors) 44

45 IRS Form 1099-R Distribution Codes Code 1 Early Distribution, no known exceptions (or exception to be claimed by the individual): Qualified Reservist Distribution Called to active duty after September 11, 2001 for 180 days or more and distribution taken while on active duty All Reserve Units Qualify 45

46 Distributions to Reservists Called to Active Duty and Special Re-Contribution Rules In Code section 101 or Title 37, the term reserve component is defined to mean: The Army National Guard of the United States The Army Reserve The Naval Reserve The Marine Corps Reserve The Air National Guard of the United States The Air Force Reserve The Coast Guard Reserve The Reserve Corps of the Public Health Service 46

47 IRS Form 1099-R X X Code 1: Early Distribution, no known exception Code 2: Early Distribution, exception applies or exception is known by the IRA custodian 47

48 IRS Form 1099-R Distribution Codes Code 2 Early Distribution Exception applies/is known Must have proper documentation 1. IRS Levy 2. Roth Conversion 3. Substantially Equal Periodic Payments Note: The 2 des not indicate which exception applies only that one of the three applies 48

49 49

50 IRS Form 1099-R 3 Code 3 - Disability 50

51 IRS Form 1099-R IRS Form 1099-R 51

52 IRS Form 1099-R 4 X Code 4 - Death Generally, Reported in Beneficiary s Name and SSN or TIN Suggestion use title, Jane Doe as beneficiary of John Doe s IRA 52

53 Distributions Death Distributions IRS Code 4 regardless of age of decedent or beneficiary Payable to beneficiary Reported in beneficiary s SSN or TIN Can never be reported in SSN of deceased Recommended obtaining death certificate Document distribution If spouse treats the IRA as his/her own, code 4 is no longer used 53

54 IRS Form 1099-R 5 X Code 5 Prohibited transaction 54

55 IRS Form 1099-R 7 X Code 7 Normal Distribution Normal Distribution Any and all distributions made to a person who is age 59½ and older unless a recharacterization or a withdrawal of an excess or a payment to a beneficiary or a prohibited transaction. 55

56 IRS Form 1099-R X 8 X Code 8 Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2012 Contribution and Correcting Distribution Same Year Withdrawing a Current Year Contribution is reported as if it was an excess contribution 56

57 IRS Form 1099-R Example 2 First National Bank 111 Main Street Eureka, FL John J. Black 351 Filton Avenue Eureka, FL P1 or P Note that the reason code will be an P1 If Mr. Black is under the age of 59½, and P if he is age 59½ or older X Contribution Unique in One Year and Correcting Distribution in Following Year (2013) (2014) 57

58 58

59 Current-year Traditional or Roth IRA Contribution Includes an excess, but need not be one Can be removed tax free Can be recharacterized, or withdrawn By due date of Federal tax return, including extensions Extended due date including tax return originally filed timely Contribution For Current-Year Contribution until 2008 October 15, October 15, October 15, October 17, October 15, October 15, October 15, 2014 Income to be taxed on the individual s tax return for the year in which the contribution was made regardless of when withdrawn 59

60 IRS Form 1099-R Box 7 Distribution code(s) Contribution For Contribution In Removed and Taxed in Use Codes 8 or 81 Taxable in Code 1 with 8 or P if under age 59½

61 IRS Form 1099-R Box 7 Distribution code(s) Use Codes P or P1 Contribution for Contribution in Removed in Taxed in Code 1 with 8 or P if under age 59½

62 Recharacterization Contribution Involves a Distribution 3 types of Recharacterizations IRS Reporting Required Forms 1099-R and Reporting Steps Traditional IRA Annual Contribution Roth IRA Annual Contribution Roth IRA Annual Contribution Traditional IRA Annual Contribution Roth IRA Conversion Traditional IRA Conversion 62

63 Recharacterization Contribution Involves a Distribution Same Year or Different Year IRS Reporting Required: 1099-R & 5498 Traditional IRA Annual Contribution Roth IRA Annual Contribution 1. Contribution to Traditional IRA on June 10, Form Recharacterized on December 10, Form 1099-R (Distribution from Traditional IRA) 3. Recharacterized Contribution on December 10, Form 5498 (to Roth IRA) 63

64 Recharacterization Contribution Involves a Distribution Same Year or Different Year IRS Reporting Required: 1099-R & 5498 Traditional IRA Annual Contribution Roth IRA Annual Contribution 1. Contribution to Traditional IRA on June 10, Form Recharacterized on February 10, Form 1099-R (Distribution from Traditional IRA) 3. Recharacterized Contribution on February 10, Form 5498 (to Roth IRA) 64

65 Recharacterization Contribution CWF Form # 54-TR1 CWF Form # 54-TR2 Only certain contributions can be recharacterized Documentation Required CWF Form # 56-TREX 65

66 CWF Form 67-WR 66

67 Recharacterizations Custodian/Trustee Reporting First National Bank 111 Main Street Eureka, FL Report original contribution on Form 5498 & Report distribution on Form 1099-R Do Not Check John J. Black 351 Filton Avenue Eureka, FL N Note that the reason code will be N! X Original Contribution & Deemed Withdrawal the Same Year (2014) 67

68 Recharacterizations Custodian/Trustee Reporting First National Bank 111 Main Street Eureka, FL Report original contribution on Form 5498 & Report distribution on Form 1099-R John J. Black Do Not Check Filton Avenue Eureka, FL R Note that the reason code will be R! Original Contribution in 2013 with the Deemed Contribution in 2014 (The following year). 68

69 Distribution Codes Contribution for Contribution in Recharacterized in Use Code N R R N R R N R R N R R N R R N R R N R R N R R 69

70 Box 7 Distribution Code(s) x S X Code S Early Distribution from a SIMPLE IRA in the first two years, no known exception 25% penalty, not 10% 70

71 Box 7 Distribution Code(s) G X Code G Similar to a Direct Rollover Traditional IRA to Qualified Retirement Plan 71

72 Box 8 Other Not used for IRAs. Used for certain Annuity transaction 72

73 IRS Form 1099-R Not Used for IRA 73

74 IRS Form 1099-R 1 st year of designated Roth Contribution - NOT used for IRAs 74

75 Box 9a Your Percentage of total distribution Not used for IRAs. 75

76 Box 9b Total employee contributions Not used for IRAs. 76

77 Boxes State Information IRS Form 1099-R Box 12 - State tax withheld Box 13 - State/Payer s state no. Box 14 - State Distribution 77

78 Boxes Local Information IRS Form 1099-R Box 15 - Local tax withheld Box 16 - Name of Locality Box 17 - Local distribution 78

79 Distributions Standard way to complete the Form 1099-R for Roth IRAs 79

80 Roth IRA Distributions General Rules Box 1 is to be completed with the gross distribution Box 2a is to be left blank Box 2b is to be checked Box 7 is to be completed, in general, with Q, T, or J IRA/SEP/SIMPLE Box is not to be checked 80

81 IRS Form 1099-R X Box 1 Gross Distribution Box 2a Taxable amount Box 2b taxable amount not determined must generally be checked for Roth IRAs

82 IRS Form 1099-R Unique Account Number X Q /T/ J

83 Roth IRA Distributions Two types of distributions Qualified and Not Qualified Difference between taxation rules and tax reporting rules. 83

84 Roth IRA Distributions Two types of distributions Qualified and Not Qualified Difference between taxation rules and tax reporting rules. The Tax Reporting Rules Qualified Distributions IRA custodian/trustee KNOWS the 5-year rule is met, and; The IRA accountholder had attained age 59½, or The IRA accountholder had died, or The IRA accountholder is disabled 84

85 Roth IRA Distributions Two types of distributions Qualified and Not Qualified Difference between taxation rules and tax reporting rules. The Tax Reporting Rules Qualified Distributions Code Q is used Non-Qualified Code T is Used IRA Custodian /trustee DOES NOT KNOW or knows the 5-year period HAS NOT been met, and; The IRA Accountholder had died, or The IRA Accountholder is disabled Code J is used when Code Q or T does not apply. This includes excess contributions and distributions on account of first time home purchase. 85

86 Roth IRA Distributions Roth IRA custodian determines if the 5-year Rule has been met by determining if the individual has met the 5-year rule at the Roth IRA custodian. Do not consider the time the individual has his or her Roth IRA at another custodian/trustee. Illustrate: Rollover in 2013 of 50% of a Roth IRA established in 2003 at Bank # 1 to Bank # 2 86

87 Roth IRA Distributions Two types of distributions Qualified and Not Qualified Difference between taxation rules and tax reporting rules. The Tax Reporting Rules A Qualified Distribution the five year Rule has been met and the distribution is on account of one of the following 4 reasons: 1. The IRA accountholder has attained age 59½, or 2. The IRA accountholder is disabled, 3. One that meets the requirements for a first-time home purchaser Limited to $10,000 lifetime,* or 4. The IRA accountholder has died * Special IRS Approach for first time home buyer 87

88 IRS Form 1099-R X Code Q Qualified distribution from a Roth IRA Q 88

89 Roth IRA Distributions Box 7 Distribution code(s) Code Q Qualified distributions from a Roth IRA You KNOW 5 year requirement has been met and on account of Age 59½ Disability Death (Payment to a beneficiary) Not 1 st time Home Purchase Special reporting 89

90 IRS Form 1099-R X Code T Roth IRA distribution, exception applies T 90

91 IRS Form 1099-R X Code J Early distribution from a Roth IRA J 91

92 Roth IRA Distributions Box 7 Distribution code(s) Code T Roth IRA distribution, exception applies You KNOW 5 year requirement has been met OR YOU KNOW the 5 year requirement has not been met Death Age 59½ Disability Not 1 st time Home Purchase 92

93 Roth IRA Distributions Box 7 Distribution code(s) Code 2 IRS Levy from Roth IRA Code 5 Prohibited Transaction in Roth IRA Not J2 or J5 93

94 Roth IRA Distributions Box 7 Distribution code(s) Code 2 IRS Levy from Roth IRA Code 5 Prohibited Transaction in Roth IRA Not J2 or J5 Code J8 Correcting excess contributions Code JP Correcting excess contributions 94

95 Traditional and Roth IRA Reporting Roth IRA Distributions CWF Form 57R 95

96 Roth IRA Distributions Exceptions for the Roth IRA when Box 2a is NOT blank Excess Contributions/Current Year Recharacterizations 96

97 Current-Year Traditional or Roth IRA Contribution First National Bank 111 Main Street Eureka, FL Report original contribution on Form 5498 & report the distribution on Form 1099-R John J. Black 351 Filton Eureka, FL J8 Unique Note that the reason code will be J8 if this is a Roth IRA 97

98 Current-Year Traditional or Roth IRA Contribution IRA Custodian/Trustee Reporting First National Bank 111 Main Street Eureka, FL Report original contribution on Form 5498 & report the distribution on Form 1099-R John J. Black 351 Filton JP Eureka, FL Unique Note that the reason code will be JP for a Roth/ 98

99 Excess Traditional or Roth IRA Contribution After Due Date Must still be corrected Must be removed from IRA Is removed without applicable earnings Distributions will not be taxed Contribution not deducted Contribution within dollar limits IRA Accountholder s responsibility to report Special 1099-R Preparation 99

100 Excess Traditional or Roth IRA Contribution After Deadline Due Date Example 1: Traditional IRA contribution of $3,000 is made on June 6, It is determined to be an excess but is not removed until November 15, 2015, after the October 15, It is reported in this manner: 100

101 Excess Traditional or Roth IRA Contribution After Due Date The distribution is reported in this manner: First National Bank 111 Main Street Eureka, FL X John J. White 351 Filton Avenue 1 or 7 Eureka, FL Unique Code Q, T or J is used for a Roth IRA Note: No earnings need to be removed 101

102 Overview Required Distributions Traditional, SEP & SIMPLE IRA IRS and Congress did not want IRA tax benefits to be perpetual IRA Accountholder Attaining age 70½ Required Beginning Date (RBD) 50 % Tax Penalty Distribution is taxed, plus 50% penalty on under-distributed amount Ultimate responsibility is IRA Accountholder s for purposes of the 50% tax Law unsettled if IRA custodian can be penalized for not following the IRA plan agreement which requires required distributions 102

103 Traditional and Roth IRA Reporting - RMD Distributions Tasks RMD Tasks / RMD Distributions 103

104 RMD Tasks Traditional and Roth IRA Reporting - Distributions RMD Tasks» Finish 2014 Duties» Plan for 2015 Duties» Determine if the IRA software/system makes the calculations correctly» For living accountholders Normally it does» For beneficiaries Many times it does not 104

105 Overview Traditional, SEP, & SIMPLE IRA Accountholders IRS and Congress did not want IRA tax benefits to be perpetual IRA Accountholder Attaining age 70½ Required Beginning Date (RBD) 50 % Tax Penalty Distribution is taxed, plus 50% penalty on under-distributed amount Ultimate responsibility is IRA Accountholder s for purposes of the 50% tax Law unsettled if IRA custodian can be penalized for not following the IRA plan agreement which requires required distributions 105

106 Traditional, SEP & SIMPLE IRA Accountholder RMD Calculations What Errors will mean the RMD as calculated will be wrong? Use of wrong age(s) Use of wrong factor Use of wrong table Use of wrong FMV Under distribution must be corrected timely, or the 50% tax is owed 106

107 Traditional and Roth IRA Reporting Traditional, SEP & SIMPLE IRA Accountholder RMD Calculations Normal Distribution Documentation CWF Form # 57 IRA Distribution Form 107

108 Traditional, SEP & SIMPLE IRA Accountholder RMD Calculations Normal Distribution Documentation Normal Distribution Reporting IRS Code 7 on Form 1099-R Regular Federal Withholding Election Rules Apply Federal Withholding Notice Rules Apply State Withholding Rules Apply 108

109 RMD Tasks» RMD Recommended Administration for Traditional IRAs» Track the Age of the Accountholder Birthdates» Furnish Annual RMD Notices Required» Calculate RMD if Requested» Document Distribution» Comply with All Withholding Rules» Follow-up with Reminders - Recommended 109

110 RMD Tasks» An IRA custodian/trustee must furnish an annual RMD notice The final regulation and Notice give the IRA custodian/trustee two alternatives. They must inform an IRA accountholder what his or her required minimum distribution amount is for each year and the date by which such amount must be distributed, or they must inform the IRA accountholder that he or she must take an RMD with respect to a specific IRA plan agreement for a given year and the date by which such amount must be distributed, offer to calculate the RMD amount upon request, and then provide the RMD amount, if requested. Under either alternative, the statement must inform the IRA owner that the information will be reported to the IRS on Form For whatever reason, the IRA custodian/trustee is not required to furnish an RMD notice to an inheriting beneficiary. CWF strongly recommends that the IRA custodian/trustee also furnish a notice to an inheriting beneficiary. 110

111 111 Traditional and Roth IRA Reporting RMD Recommended Administration Track the Age of Accountholder Furnish Annual RMD Notice Required.00 CWF Form # 62-1 Required Distribution Notice

112 112 Traditional and Roth IRA Reporting RMD Recommended Administration Track the Age of Accountholder Furnish Annual RMD Notice Required.00 CWF Form # 62-2 Required Distribution Notice

113 113 Traditional and Roth IRA Reporting RMD Recommended Administration Track the Age of Accountholder Furnish Annual RMD Notice Required.00 CWF Form # 62-3 Required Distribution Notice

114 114 Traditional and Roth IRA Reporting Withholding Reminder Notice Rules 1 per Year 2 times per year or more Reasonable notice, but no more than 6 months in advance

115 115 Traditional and Roth IRA Reporting CWF Form # 312 Election to Use the Alternative Method for Required Minimum IRA Distributions

116 » RMD Notices RMD Tasks Traditional and Roth IRA Reporting - Distributions RMD Tasks» Furnishing RMD Notices to inheriting beneficiaries is strongly recommended. Even though IRS does not require it in the instructions for R forms.» IRA Plan Agreement Requires RMDs. 116

117 RMD Tasks Traditional and Roth IRA Reporting - Distributions RMD Tasks» Traditional, SEP & SIMPLE IRA Accountholder RMD Calculations» RMDs and Rollovers. RMDs are ineligible to be rolled over. Mistakes sometimes happen and the IRA custodian prepares the Form 5498 incorrectly. Example: IRA Accountholder rolls over $25,000 on June 15, July 15, 2014 he informs you it included his RMD of $2,500.» 2012 Form 5498 Must Be Corrected 117

118 RMD Tasks Traditional and Roth IRA Reporting - Distributions RMD Tasks» Traditional, SEP & SIMPLE IRA Accountholder RMD Calculations» RMDs and Rollovers. RMDs are ineligible to be rolled over. Mistakes sometimes happen and the IRA custodian prepares the Form 5498 incorrectly. Original Form 5498 (Incorrect) X X 118

119 Traditional, SEP & SIMPLE IRA Accountholder RMD Calculations RMDs and Rollovers RMDs can never be rolled over Any RMD rolled over is reported as a Regular Contribution» Form 5498 must be corrected to show correct amounts X X X 119

120 FMV RMD Statements Tasks Traditional and Roth IRA Reporting - Distributions» FMV Statements» Due by January 31, 2015 request FMV as of 12/31/2014. IRA custodian/trustee must determine value annually.» Options (How Related to Form 5498) 1. Very brief Furnish only FMV as of 12/31 2. List annual transactions and furnish FMV as of 12/31 3. Send Form 5498 in January and also in May for those who make carryback contributions. 4. Send Form 5498 in May 120

121 RMD Recommended Administration Track to Age of the Accountholder Furnish Annual RMD Notice Required Notify of RMD in coming year Identify RMD Due Date RBD or December 31 Identify RMD Amount or Notify you will calculate RMD upon request Notify that it is Reported to IRS on Form 5498 No exceptions Furnish by January 31 All traditional, SEP and SIMPLE IRAs If asked to calculate, custodian/trustee must calculate RMD 121

122 RMD Recommended Administration 2014 IRS Form Reports of 2014 RMD Due X 122

123 RMD Recommended Administration 2014 IRS Form 5498 Box 12a RMD Date May indicate due of RMD for

124 RMD Recommended Administration 2014 IRS Form 5498 Box 12a RMD Date Box 12b RMD amount May indicate RMD amount for

125 IRS Form 1099-R Correcting Form 1099-R Responsibility of IRA Custodian/Trustee Type # 1 Correct TIN, Incorrect information Money amounts, Codes, Checkbox, Incorrect address, Incorrect payee name, or A return was filed when one should not have been Requires just one corrected Form 1099-R 125

126 IRS Form 1099-R Correcting Form 1099-R Responsibility of IRA Custodian/Trustee Two Error Types Type # 1 Correct TIN, Incorrect information Requires just one corrected Form 1099-R Complete entire Form 1099-R Correct TIN, Incorrect Data x Example x Original 1099-R 126

127 IRS Form 1099-R Correcting Form 1099-R Responsibility of IRA Custodian/Trustee Two Error Types Type # 1 Correct TIN, Incorrect information Requires just one corrected Form 1099-R Complete entire Form 1099-R x Correct TIN, Incorrect Data x Example x Corrected 1099-R 127

128 IRS Form 1099-R Correcting Form 1099-R Responsibility of IRA Custodian/Trustee Two Error Types Type # 1 Correct TIN, Incorrect information Type # 2 Incorrect TIN Incorrect payee name AND address, or original return was filed using wrong type of form Requires two 1099-Rs 128

129 IRS Form 1099-R Requires two 1099-Rs Zero out incorrect TIN Issue original or Corrected 1099-R with correct TIN Incorrect TIN, Correct Data x Example 7 x Original 1099-R 129

130 IRS Form 1099-R Requires two 1099-Rs Zero out incorrect TIN Issue original or Corrected 1099-R with correct TIN x Incorrect TIN, Correct Data x Example 7 x Corrected Original 1099-R 130

131 IRS Form 1099-R Requires two 1099-Rs Zero out incorrect TIN Issue original or Corrected 1099-R with correct TIN Incorrect TIN, Correct Data Example 7 x Corrected TIN and Data 131

132 IRS Form 1099-R Correcting Form 1099-R Substitute Form 1099-R Due Dates January 31 February 28/29 March 31 IRA Owner / Beneficiary IRS IRS Electronic 132

133 IRS Form 1096 Annual Summary and Transmittal of U.S. Information Returns Box 6 Check only one box as applicable X 133

134 IRS Form 1096 Annual Summary and Transmittal of U.S. Information Returns Box 7 Complete if applicable X 134

135 Withholding 135

136 Withholding Federal Withholding Procedures Election Procedure and documentation 10% Federal withholding is required on every traditional IRA distribution unless an election is properly completed Documentation is required, IRS W-4P or valid substitute Documentation is required, IRS W-4P or valid substitute CWF #

137 Withholding Federal Withholding Procedures Penalty on the IRA custodian/trustee for non-compliance is the amount of withholding that should have been withheld and was not. Penalty on the IRA custodian/trustee for non-compliance could be the amount of taxes owed by the IRA accountholder. 137

138 Withholding Federal Withholding Procedures Notice Requirements Proper notice must be given prior to every distribution only once-per-year if receiving 4 or more scheduled distributions» If mailed, notice must be received within 6 months and a reasonable amount of time before the distribution» Penalty on the IRA custodian/trustee for non-compliance is $10 for each failure 138

139 Withholding Federal Withholding Procedures Deposit Requirement Transfer Monthly, semi-weekly, or annually Check or Electronic Funds 139

140 Traditional and Roth IRA Reporting Withholding Federal Withholding Procedures 2014 Annually, IRS Form 845 is due by January 31 for the previous year IRS Form

141 141 Traditional and Roth IRA Reporting Reporting Requirements Annually, IRS Form 945 is due by January 31 for previous year Verify all mounts on Forms 1099-R Form 945-A Calculate and Report Withholding NEW IRS 945-X Adjusted Annual Return of Withholding Federal Income Tax or Claim for Refund

142 142 Traditional and Roth IRA Reporting Basic informational data is completed

143 Federal Withholding Procedures Non-Resident Alien Withholding Procedures Usually 30% Withholding is due (Recommended Procedure) Could have tax treaty differing percentage Special reporting using IRS Form 1042 series IRS Form 1042-S instead of 1099-R 143

144 IRA Rollovers IRA Custodian reports as a standard IRA distribution since it is not known that the individual will actually do the rollover 144

145 NEW IRS Reporting Penalties $100 Penalty (and other new penalties) will apply to 2010 Form 1099-R and subsequent years. $50 Penalty continues to apply to: Form 1099-Q, 1099-SA, 5498, 5498-ESA, and 5498-SA (Section 6693) The penalties under sections 6721 and 6722 do not apply to: Forms 1099-SA and 5498-SA ESA 1099-Q Filed under Code Section: 220(h) and 223(h) 408(i) and 408(i) 530(h) 529(d) and 530(h) The penalty for failure to timely file Forms 1099-SA, 5498-SA, 5498, 5498-SA, or 1099-Q is $50 per return with no maximum, unless the failure is due to reasonable cause. See section

146 NEW IRS Reporting Penalties Pursuant to Code Section 6721 and 6722 The amount of the penalty is based on when you file the correct information return. The penalty is: $30 per information return if you correctly file within 30 days (by march 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses). $60 per information return if you correctly file more than 30 days after the due date but by August 1: maximum penalty $500,000 per year ($200,000 for small businesses) $100 per information return if you file after August 1 or you do not file required information returns maximum penalty $1,500,000 per year ($500,000 for small businesses). 146

147 This concludes session # 1 of the Traditional and Roth IRA Reporting Webinar. We thank you for attending. If you have any questions regarding the subjects covered in this webinar please feel free to call us at or send an to jmcarlson@pension-specialists.com or visit us on the Internet at Copyright 2014 Collin W. Fritz & Associates, Ltd. The Pension Specialists

148 call us at or send an to Copyright 2014 Collin W. Fritz & Associates, Ltd. The Pension Specialists All rights reserved. No part of this presentation may be reproduced in any form and by any means without prior written permission from Collin W. Fritz & Associates, Ltd.