| Will I receive a 1099-R
(or any tax form) for my retirement account?
You
will receive a form 1099-R only if you took a
distribution from your retirement account.
Why did I
receive a Form 1099-R?
If
you took any kind of distribution from a qualified
retirement plan (401(k), 403(b), etc.) you will
receive a Form 1099-R.
You should consult a tax professional about any
possible tax implications.
When will my
1099-R form be mailed?
Your
Form 1099-R will be mailed no later than
January 31, 2006
, according to IRS guidelines.
I rolled over my retirement
account balance to another qualified plan or to an IRA
– why did I receive a 1099-R form?
The
IRS’ 1099-R Instructions require us to report any
direct rollover of an eligible rollover distribution.
A rollover distribution is not a taxable
distribution. You
will note that box
2a
– Taxable Amount - is left blank, indicating that
this is not a taxable event. Also, the code in
box 7 (Code G) Tells the IRS that it is a rollover.
I haven’t
received my 1099-R form yet – can I get a copy?
1099-R
forms will be mailed no later than
January 31, 2007.
Please allow 10 days for receipt.
If you haven’t received your form by February
14, please contact Kelli Hill in our Trust Department
at 800-444-1311, ext. 1353 or by e-mail kelli.hill@handgroup.com.
After February 14, we will send a duplicate
copy by mail, fax or e-mail.
Am I subject to the 10%
penalty for early withdrawal?
To
discourage the use of pension funds for purposes other
than normal retirement, the law imposes an additional
10% tax on certain early distributions of these
funds. Early distributions are those you receive
from a qualified retirement plan or deferred annuity
contract before reaching age 59 1/2.
Distributions
that are not taxable, such as distributions that you
roll over to another qualified retirement plan, are
not subject to this 10% tax.
There
are certain exceptions to this penalty. The
following five exceptions apply to distributions from
any qualified retirement plan:
-
Distributions
made to your beneficiary or estate on or after
your death.
-
Distributions
made because you are totally and permanently
disabled.
-
Distributions
made as part of a series of substantially equal
periodic payments over the life expectancy of the
owner or life expectancies of the owner and the
beneficiary. If these distributions are from
a qualified plan other than an IRA, you must
separate from service with this employer before
the payments begin for this exception to apply.
-
Distributions
that are equal to or less than your deductible
medical expenses, that is, the amount of your
medical expenses that is more than 7.5% of your
adjusted gross income.
-
Distributions
made due to an IRS levy of the plan.
The
following additional exceptions apply only to
distributions from a qualified retirement plan other
than an IRA:
-
Distributions
made to you after you separated from service with
your employer, if the separation occurred in or
after the year you reached age 55.
-
Distributions
made to an alternate payee under a qualified
domestic relations order.
-
Distributions
of dividends from employee stock ownership plans.
Source:
Topic 558
- Tax on Early Distributions from Retirement Plans
http://www.irs.gov/taxtopics/tc558.html
How do I report the
information on my 1099-R?
Hand
Benefits & Trust Company cannot provide any tax
advice. You
should consult a tax professional about the reporting
of the information found on your 1099-R.
What does the distribution
code in
box
7
indicate?
|
Guide
to Distribution Codes
|
| |
|
|
| Distribution
Codes |
Explanations |
Used
with code...(if
applicable)
|
| |
|
|
| 1—Early
distribution, no known exception. |
Use
Code 1 only if the employee/taxpayer has not
reached age 59 1/2 and you do not know if any
of the exceptions under Distribution Code 2,
3, or 4 apply. Use Code 1 even if the
distribution is made for medical expenses,
health insurance premiums, qualified higher
education expenses, a first-time home
purchase, or a qualified reservist
distribution under section 72(t)(2)(B), (D),
(E), (F), or (G). Code 1 must also be
used even if a taxpayer is 591/2 or older and
he or she modifies a series of substantially
equal periodic payments under section
72(q), (t), or (v) prior to the end of the
5-year period.
|
8,
B, D, L, or P |
| |
|
|
| 2—Early
distribution, exception applies. |
Use
Code 2 only if the employee/taxpayer has not
reached age 591/2 and the distribution is:
-
A
Roth IRA conversion (an IRA
converted to a
Roth IRA).
-
A
distribution made from a qualified
retirement plan or IRA because of an IRS
levy under section 6331.
-
A
section 457(b) plan distribution that is
not subject to the additional 10% tax. But
see Section 457(b) plan distributions on
page R-9 for information on distributions
that may be subject to the 10% additional
tax.
-
A
distribution from a qualified retirement
plan after separation from service where
the taxpayer has reached age 55.
-
A
distribution from a governmental defined
benefit plan to a public safety employee
after separation from service where the
taxpayer has reached age 50.
-
A
distribution that is part of a series of
substantially equal periodic payments as
described in section
72(q), (t), or (v).
-
Any
other distribution subject to an exception
under section 72(q), (t), or (v) that is
not required to be reported using Code 1,
3, or 4.
|
8,
B, D, or P |
| |
|
|
| 3—Disability.
|
For
these purposes, see section 72(m)(7). |
None |
| |
|
|
| 4—Death. |
Use
Code 4 regardless of the age of the
employee/taxpayer to indicate payment
to a decedent’s beneficiary, including an
estate or trust. Also use it for death benefit
payments made by an employer but not made as
part of a pension, profit-sharing, or
retirement plan.
|
8,
A, B, D, G, L, or P
|
| |
|
|
| 7—Normal
distribution. |
Use
Code 7: (a) for a normal distribution
from a plan, including a traditional IRA, if
the employee/taxpayer is at least age 59 1/2, (b)
for a Roth IRA conversion or re-conversion
if the participant is at least age 59 1/2, and
(c) to report a distribution from a
life insurance, annuity, or endowment contract
and for reporting income from a failed life
insurance contract under sections 7702(g) and
(h). See Rev. Rule. 91-17, 1991-1 C.B. 190.
Use Code 7 with Code A, if applicable.
Generally, use Code 7 if no other code
applies. Do not use Code 7
for
a Roth IRA distribution.
Note:
Code
1 must be used even if a taxpayer is 591/2 or
older and he
or she modifies a series of substantially
equal periodic payments
under
section 72(q), (t), or (v) prior to the end of
the 5-year period. |
A |
| |
|
|
| 8—Excess
contributions plus/earnings excess deferrals
(and/or earnings) taxable in 2006.. |
Use
code 8 for IRA distribution under section
408(d)(4), unless Code P applies. Also
use this code for corrective distributions of
excess deferrals, excess contributions, and
excess aggregate contributions, unless Code D
or P applies. |
1,
2, 4, B, or J |
| |
|
|
| 9—Cost
of current life insurance protection. |
Use
Code 9 to report premiums paid by a trustee or
custodian for current life or other insurance
protection.
|
None
|
| |
|
|
| D—Excess
contributions plus earnings/excess deferrals
taxable in 2004.
|
See
the explanation for Code 8. Generally, do not
use Code D for an IRA distribution under
section 408(d)(4) or 408(d)(5).
|
1,
2, or 4
|
| |
|
|
| E—Excess
annual additions under section 415/certain
excess amounts under section 403(b) plans.
|
See
Excess Annual Additions Under Section 415 on
page R-4. |
None |
| |
|
|
| G—Direct
rollover and rollover contribution. |
Use
Code G for a direct rollover from a qualified
plan (including a governmental section 457(b)
plan) or 403(b) plan to an eligible retirement
plan (another qualified plan, a 403(b) plan,
or an IRA). See Direct Rollovers on
page R-3. Also use Code G for certain
distributions from conduit IRAs to an employer
plan and IRA rollover contributions to an
accepting employer plan. See Conduit IRAs on
page
R-2. |
4
or B |
| |
|
|
| L—Loans
treated as deemed distributions under section
72(p).
|
Do
not use Code L to report a loan offset. See Loans
Treated as Distributions
on
page R-4.
|
1,
4 or B
|
| |
|
|
| P—Excess
contributions plus earnings/ excess deferrals
taxable in 2005. |
See
the explanation for Code 8. The IRS suggests
that anyone using Code P for the refund of an
IRA contribution under section 408(d)(4),
including excess Roth IRA contributions,
advise payees, at the time the distribution is
made, that the earnings are taxable in the
year in which the contributions were made.
|
1,
2, 4, or J
|
| |
|
|
| Additional
codes can be located on the IRS’ website:
http://www.irs.gov/pub/irs-pdf/i1099r.pdf |
|
