Why am I Receiving a Form 5498 in May?

If you have a Health Savings Account, a Roth IRA, or other IRA, you may be receiving a Form 5498 in May. Many people are confused as to its purpose and in particular, timing. It seems like you just got done receiving and compiling all your tax forms and now your financial institution sends this one in May? Hello, isn’t that a little late? Or were they lazy because of the extended deadline this year? Do I have to call my accountant or my financial planner, again?

Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to these accounts. Perhaps you made them last year, or perhaps you made them before the April 15 deadline (which has been extended to July 15 for 2020) and had them “count” for 2019.

One purpose of the Form 5498 is for the financial institution (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return. It also tells the IRS what your Required Minimum Distribution will be for the current year. But as you may recall, RMD’s are suspended for 2020 so that figure should be 0.

Since everyone usually has until April 15 to make contributions, the IRS usually gives custodians until May 31 to send the Form. This year, some custodians are still sending the 5498 in May anyway, probably because their systems are programmed to do so. If you receive one in May but still intend to make a 2019 contribution between May and July, you will receive an updated 5498 after July 15.

Before you file the 5498 away, make sure it’s correct. Mistakes are common. In 2018, my husband and I both had erroneous 5498’s for our Health Savings Accounts. I made my 2017 contribution in February 2018 and he made his on an ongoing quarterly basis. Mine showed 0 contributions for 2017 and his showed 2 years’ worth. So we called the bank where they were held and got corrected ones sent to the IRS for 2018.

If your 5498 differs from what you reported on your 1040, at some point it could get noticed. Then one fantastic sunny day in the future, as you skip to your mailbox, inside will be a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined.

More than likely, all the letter will say is, “Hey, we noticed your 5498 doesn’t match your 1040. What gives?” But still. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now.

It only takes a few minutes. Does your contribution amount for 2019 look correct? Did you take any 2019 HSA or IRA distributions, and if so, do those look correct? (If not, make sure it says 0.) Is your SSN correct? How about your name, including your middle initial?

If anything looks amiss, contact your custodian to get a corrected one issued ASAP.

By this time of year, it’s normal to feel sick of tax stuff. The last thing you may want to do is deal with another form, especially an erroneous one. If you don’t want the bother, at least forward it to your financial or tax professional to check it out and help. It’s no bother. Whether it’s May, July, January, or December – we deal with tax stuff all year long.

Holly Donaldson

Holly Donaldson, CFP® runs an hourly and fee-for-service financial planning practice virtually from her Tampa Bay, Florida office. She also works with clients throughout the U.S. (except Texas) interested in retirement and tax planning advice without product sales or investment management. Holly is the author of The Mindful Money Mentality: How to Find Balance in Your Financial Future (Porchview Publishing, 2013) and publisher of the award-winning monthly e-letter, "The View From the Porch."

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