IRS Reporting Made Simple: How Financial Organizations Can Get It Right Every Time
Your clients have faith that when it comes to their retirement accounts, you’ve got the details covered. And for the most part, that’s true. But IRA reporting has plenty of moving parts, and small mistakes can quickly lead to confusion, IRS corrections, or extra time spent untangling complicated problems.
The good news is that with the right processes, tools, and communication strategies, IRA reporting can be straightforward and stress-free. Let’s walk through the most common challenges, and how organizations like yours can keep both your IRA owners and your staff confident and compliant.
IRA reporting for financial organizations centers on two key forms.
Form 1099-R, which reports IRA distributions, including withholding.
Form 5498, which reports regular contributions, fair market value, rollover contributions, recharacterizations, and required minimum distribution (RMD) information.
When the information reported on these forms is accurate, your IRA owners have what they need for their tax filings and the IRS has what it needs for compliance.
Where Problems Typically Arise
Even experienced teams occasionally run into reporting hiccups. The most common pitfalls include the following.
Incorrect distribution codes
Transfers reported as rollovers, or vice versa
Missed deadlines (not providing forms to clients or the IRS on time)
Incorrect Social Security numbers or other client information
Contributions over the annual IRA limit
Although these issues can be corrected, avoiding them in the first place saves time and helps build trust with your IRA owners.
At Ascensus, we have heard our share of reporting horror stories. We assist many financial organizations in reducing the amount of tax season compliance errors that are discovered after they submit their information to us. If you’ve had to file reporting corrections for multiple years, then you understand how complex an IRA correction can get. Each correction for a tax year will involve filing one or two forms, depending on the type of correction involved. If it’s a prior-year correction, you’ll need to obtain a form for that tax year to properly file a correction that the IRS won’t reject.
Your core system provider might help you with corrections, but some don’t.
Lean on Ascensus for Support
Maybe it’s time to consider a new process, a new provider. Let Ascensus be one of the experts that you lean on for support, especially when it comes to IRA reporting and compliance. We can help file your tax reporting for you.
The key to our accuracy and our success is two-fold. We have experts who keep us updated on new regulations and tax reporting changes. As a result, we’ve built the technology to match our compliance expertise, enabling us to find and mitigate tax reporting errors before they become problems for you and your clients. Our top priority is to ensure that your organization remains IRS compliant.
Our tools and systems are designed to simplify reporting. Ascensus’ Fully-Administered Program takes the uncertainty and stress out of generating tax reporting for IRAs, HSAs, and Coverdell ESAs.
Our clients use one of two methods to send us their information.
Option 1: Enter individual transactions into our secure online processing system, IRAdirect. The built-in form wizard’s logic will prevent you from entering incorrect information and will guide you on the right path to accurate transactions and reporting, so you can feel confident that you completed the form correctly.
Option 2: Send us a file with all annual transactions, and we’ll handle the rest.
With both methods, our compliance logic works behind the scenes to catch common errors that could otherwise slip through unnoticed. Plus, we can generate and mail tax forms to your account owners, the IRS, and any applicable state agencies.
With Ascensus as part of your back-office team, you can focus on what matters most.
To learn more about Ascensus’ Fully-Administered Program email us at salessupport@ascensus.com.
