A Confusing Tax Form Coming to a Mailbox Near You (Form 5498)

Form 5498

Just as our US Federal main tax filing dates fade in our memory, many times a straggling IRS form lands in our mailbox, causing some confusion.

Form 5498 is sent as a means of IRS reconciliation and tracking. For example, if an individual rolls a 401k over from his or her old employer into an IRA account, the firm receiving the rollover generates a Form 5498.  In this case the former employer also generates a tax form showing the funds were distributed (Form 1099.)

In our example form 5498 is sent to the investor AND the IRS for proof the funds did in fact get rolled over and did not make their way out of IRA status, thereby becoming taxable i.e. Proof that the investor did not take the money and spend it!

All of this sounds reasonable, but due to the timing effect of filing dates and reconciliation, Form 5498 makes its way into our mail box in May of the following year, which is the main source of confusion for most.

So if you happen to see a tax form sometime soon, not to worry, just place it in your freshly started current year tax folder and you will be in good shape.

Have a Great Day!

JK

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