What is tax form 5498 and what is the point of filling it out?


Some reporters choose to use a individual retirement account (IRA), which allows them to save for their retirement with more advantageous tax conditions. This can take the form of a Traditional IRA, Roth IRA, or IRA rollover, each with different benefits.

However, in order to keep the IRS up to date with any contributions you have made to the IRA, you will need to complete Form 5498, which also covers all requalifications, conversions, and fair market values ​​applicable at year end.

Even though Roth IRAs are not eligible for a tax deduction, you must still make sure all contributions are reported to the IRS in the same way. Here’s everything you need to know about filing Tax Form 5498.

Why do I have to complete tax form 5498?

To receive tax deductions and other benefits associated with individual retirement accounts, you must complete what the IRS calls “Information on contributions to the IRA”, also known as Form 5498. This will allow you to provide details about the amount you contributed to an IRA during the last fiscal year.

Filing Form 5498 will allow you to take advantage of tax benefits but you may not be entitled to deduct the full amount; the IRS has fixed Contribution limits for IRAs that limit the amount you can receive.

The limit for those under 50 is $ 6,000 per year, while someone has aged 50 or older can contribute up to $ 7,000 to their IRA and get the full deduction. These limits remained unchanged for the 2020 and 2021 tax years, but the IRS periodically changes the thresholds to reflect inflation.

Is an IRA a Good Investment?

Financial experts generally suggest that you will need up to 85% of your annual pre-retirement income during retirement. Some workplaces offer an employer-sponsored savings plan, like 401 (k), but that’s not always enough.

For this reason, an IRA can be a good option, allowing you to supplement your existing pension plan with regular payments. The IRA will also offer a wider range of investment choices and allow you to take advantage of tax deductions claimed using Form 5498.

Of course, the size of the retirement pot you accumulate largely depends on how much money you can contribute to it, but it’s also a good idea to check out the different types of IRAs on offer to make sure you’re get the best deal. This handy IRA contribution calculator makes it easy to determine which option is best for you.

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