Form 5498 - Deadline for the 2020 Tax Year

Updated on May 24, 2021 - 10:30 AM by Admin, TaxBandits

Financial Institutions providing the Individual Retirement Account (IRA) to the participants should
file Form 5498. For the 2020 tax year, the IRS has postponed the deadline for filing and furnishing this Form 5498. This article covers the deadline for the 5498 Form for 2020.

Let’s cover the following topics:

1. What is IRS Form 5498?

The IRS Form 5498 is used to report information related to IRAs, which are retirement plans. Some of the information found on the Form 5498 includes the contributions made by the participant throughout the year, the Fair Market Value (FMV), and any direct rollovers, transfers, or recharacterizations of the account.

Types of IRA Contributions

There are four main types of IRAs. This includes the Traditional IRA, Roth IRA, SEP IRA, and Simple IRA.

The traditional IRA is one where contributions are tax-deductible, the IRA holder is not required to pay taxes on their contributions. Taxes are collected instead when the IRS holder withdraws funds
from the IRA.

When the IRA holder reaches the age of 72, they are then required to make regular withdrawals. These withdrawals are called the Required Minimum Distribution. Individuals that do not adhere to this rule are liable for a penalty totaling 50% of the Required Minimum Distribution.

The Roth IRA is essentially the opposite of the traditional IRA. The contributions made to this account are not tax deductible, however, distributions from the account are tax-free. The Roth IRA has no rule on age or a Required Minimum Distribution. However, there are some limitations on contributions in relation to the individual's income.

Next is the SEP IRA, this type of IRA is a “simplified employee pension”. This IRA caters to independent contractors, freelancers, and small business owners. This is set up by the employer and they are allowed to deduct the contributions they make on behalf of their workers. Withdrawals from this type of
IRA are taxed.

Finally, there is the SIMPLE IRA. Much like the SEP IRS it is suitable for individuals that are self-employed. This stands for “savings incentive match plan for employees”. Employers are required to make contributions and employees are able to contribute to their IRA as well. Contributions are tax-deductible, but withdrawals are taxed.

2. Who should file 5498?

This form must be filed by the entities that maintain the IRA, also referred to as the trustee. The trustee is usually a bank or financial institution. This form should be completed for every individual that has an IRA with the financial institution, these individuals are referred to as participants. If the participant has established more than one IRA plan with the same trustee, a separate Form 5498 must be filed for each of the plans.

3. When is the deadline for filing Form 5498?

The Form 5498 filing deadline is usually May 31, however, this deadline has been extended for tax year 2020. This year the Form 5498 must be filed by June 30, 2021. This deadline applies whether you plan to paper file or e-file these forms with the IRS.

Recipient copies must be distributed by June 30, 2021, with the exception of forms reporting Fair Market Value and Minimum Required Distributions. These should have been distributed by February 1, 2021.

4. What are the penalties for 5498 errors?

Penalties for failure to file accurate forms on time can be pricey. You can be penalized for $50 per form if it is filed correctly within 30 days of the deadline. After the initial 30 days pass, until August 1, 2021 the penalty rises to $110 per form. After August 1, 2021, the penalty rises to $280 per form.

5. Filing methods for 5498 tax Form

When it comes to filing methods for 5498 Forms, trustees have two options. They can file paper copies with the IRS, or they can file electronically. The IRS preferred filing method is electronic filing. This is more convenient for the IRS because they are able to process e-filed forms at a faster rate and it is more convenient for filers because they are able to get quicker updates from the IRS.

If you are searching for an IRS authorized e-file provider that supports the Form 5498, look no further than TaxBandits. Follow the below steps for easy e-filing of 5498 with TaxBandits.

  • Sign in to your TaxBandits Account

  • Select the “Form 5498” to file

  • Enter the Form information

  • Review, pay and Transmit to the IRS

We support both e-filing with the IRS and postal mailing options for the participant copies. Also we offer a simple e-file process with features for accurate filing!

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