What is Form 5498: IRA Contributions Information?

man putting coin in piggy bank

This article was last edited on 11/18/2019. For updated information on Form 5498, visit https://www.irs.gov/forms-pubs/about-form-5498.

If anyone on your small business staff, like many Americans, uses an individual retirement arrangement (IRA) to prepare for the future, they’ll receive Form 5498: IRA Contributions Information each year. The financial institution that oversees the retirement account will send a copy to your team members by May 31. The form summarizes all IRA contributions made during a given tax year to the IRS.

Because your workers will receive this form in May, after they’ve filed their personal tax returns, they don’t have to include the form with their Form 1040. Instead, they should keep it for their own records.

There are four types of IRAs:

  1. traditional
  2. savings incentive match plan for employees (SIMPLE)
  3. simplified employee pension (SEP)
  4. Roth

Traditional IRAs

If someone uses a traditional IRA, all their contributions are tax-deductible and can accumulate earnings. Any withdrawals, including the required minimum distributions that begin when the worker turns 70 ½, are reported and taxed as income.

Read also: Is My Retirement Plan Taxable for Social Security and Medicare Purposes?

A big advantage of having a traditional IRA is that the staff member can make a contribution before the tax filing deadline in April and apply it to the prior tax year to lower their tax liability. Therefore, financial institutions have until May 31 to file Form 5498 each year.

Roth IRAs

Roth IRAs work a little differently than a traditional IRA account. Contributions made to a Roth IRA are taxable to federal income tax, but withdrawals won’t be taxed. This is an excellent option if your team member expects to retire at a higher tax bracket than they’re currently at.


While traditional and Roth IRAs are typically set up by an individual to save for their own retirement, SIMPLE and SEP IRAs are set up by you, the employer. In both cases, you’ll make contributions to your employees’ accounts. The difference, however, is whether your worker can make contributions.

  • With a SIMPLE IRA, you’ll withhold funds from your team member’s paycheck to deposit into their retirement account. Read also: What is Net Pay and How Is It Calculated?
  • If you set up SEP IRAs for your staff, only you can make contributions to their accounts.

Read also: Are You Ready for Retirement?

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