Form 1040 Line 15: How to Report IRA Distributions

Distributions from IRAs are reported on Form 1040. Specifically, lines 4a and 4b are used to report funds you have withdrawn from an Individual Retirement Arrangement (IRA). This applies to several types of IRAs, such as Traditional, SEP, and SIMPLE IRAs. The purpose of these lines is to accurately report the total amount withdrawn and, separately, the portion of that withdrawal that is subject to income tax.

Understanding Your Form 1099-R

When you receive a distribution from an IRA, the financial institution acting as the custodian is required to send you Form 1099-R, “Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.” This document provides the details about the withdrawal that you will need for your tax return and is mailed by January 31 of the year following the distribution.

The most important entries on Form 1099-R are found in three specific boxes. Box 1, “Gross distribution,” shows the total amount of money you received from the IRA before any withholdings. Box 2a, “Taxable amount,” indicates the portion of the distribution that the payer has determined is subject to income tax, but this figure may not always be the final taxable amount.

Box 7 contains “Distribution code(s)” that inform the IRS about the nature of your withdrawal. For example, a Code 1 signifies an early distribution, which may be subject to a 10% additional tax, while a Code 7 indicates a normal distribution for a person age 59½ or older. Other codes exist for events like rollovers or distributions due to disability, and these codes directly influence how the distribution is treated for tax purposes. If you received different types of distributions, you might receive more than one Form 1099-R.

Calculating the Taxable Amount

The total withdrawal amount shown in Box 1 of your Form 1099-R is entered directly onto Line 4a of Form 1040. Following that, you will determine the figure for Line 4b, which is the taxable portion of the distribution. In many straightforward cases, the amount listed in Box 2a of Form 1099-R is the correct taxable amount to enter on Line 4b. If your IRA was funded entirely with pretax, deductible contributions, the entire distribution is taxable, and Box 1 and Box 2a on your 1099-R will likely show the same amount.

An exception arises if you have ever made nondeductible contributions to any of your Traditional, SEP, or SIMPLE IRAs. These are contributions for which you did not take a tax deduction, meaning you have already paid income tax on that money. This creates a “basis” in your IRA, which represents the after-tax amount that can be withdrawn tax-free.

If you have a basis in your IRA, you cannot simply use the taxable amount reported in Box 2a of Form 1099-R. You are required to calculate the taxable portion of your distribution yourself using Form 8606, “Nondeductible IRAs.” This form walks you through the pro-rata calculation to determine the tax-free percentage of your current withdrawal. Failure to file Form 8606 when required can lead to paying tax on money that should be tax-free and may result in a penalty.

Reporting Rollovers

A common transaction involving IRAs that requires specific reporting is a rollover. A rollover occurs when you move funds from one retirement account to another, such as from one IRA to another IRA. If completed correctly within the 60-day time limit, a rollover is not a taxable event, but it must still be reported on your tax return. The distribution code in Box 7 of your Form 1099-R will often indicate that a rollover was intended.

The reporting procedure for a full rollover is distinct. First, you enter the total amount of the distribution, as shown in Box 1 of your Form 1099-R, on Line 4a of your Form 1040. Next, because the entire amount was moved to another retirement account and is not being taxed, you enter zero on Line 4b. To clarify the transaction for the IRS, you must also write the word “ROLLOVER” in the space to the left of Line 4b. This notation explicitly informs the IRS why the gross distribution on Line 4a resulted in no taxable income.

If you only rolled over a portion of the distribution, the process is slightly different. The full gross distribution still goes on Line 4a. However, on Line 4b, you would enter the amount that was not rolled over, as this portion is a taxable distribution. The receiving institution will later report the rollover deposit to the IRS on Form 5498, which helps confirm the transaction.