IRA Reporting to the IRS: Dodging the Pitfalls
Following the “Garbage In/Garbage Out” rule, if we don’t use the correct transaction descriptions or codes for the IRA contributions and distributions, the resulting incorrect IRS reporting will trigger a letter and bill from the IRS to our customers.
The boxes you check on your forms, and the transactions descriptions you use to process the work, translate into certain codes on the 1099-R IRA Distribution Reporting and populate certain contribution boxes for the types of contributions on the 5498.
If the reported transactions by the institution do not match what the customer is saying on their tax return, it can create all kinds of nightmare scenarios for the customer to explain to the IRS that it was an “institution mistake.”
And, if you have ever had to correct previous year reporting mistakes, you never want to do it again. You will want to make sure it is correct when the forms are originally submitted.
