The deadline to report individual retirement account (IRA) contribution information to both the Internal Revenue Service (IRS) and to IRA owners is May 31 each year. Contributions to traditional and Roth IRAs, including simplified employee pension (SEP) contributions, and Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRAs are included in this reporting. An important distinction to understand and communicate to employers and account owners is how prior year SEP and SIMPLE IRA contributions are reported vs. how prior year IRA regular contributions are reported.
Reporting SEP and SIMPLE Plan contributions
IRA custodians and trustees report contributions to SEP IRAs in Box 8 of IRS Form 5498, IRA Contribution Information, and contributions to SIMPLE IRAs in Box 9 of IRS Form 5498. Unlike regular contributions made to traditional and Roth IRAs, SEP and SIMPLE contributions are reported for the year in which they are received by the custodian/trustee. Therefore, a SEP or SIMPLE contribution made in 2023 for 2022 will be reported on a 2023 Form 5498, not a 2022 Form 5498, even though an employer deducts such contributions on its 2022 income tax return. Another way to consider this is a participant’s 2023 Form 5498 will include all SEP or SIMPLE contributions made during calendar year 2023, which would include any contributions made for tax year 2022, but it will not include contributions made in 2024 for 2023. This is often a confusing issue for some business owners and their tax professionals.
Why the inconsistency?
So, why are prior year SEP and SIMPLE IRA contributions not reported in the same manner as prior year IRA regular contributions? It is likely because employers can make SEP and SIMPLE contributions until their tax-filing deadline, including extensions, whereas a tax-filing extension that an individual is granted will not extend the deadline to make an IRA regular contribution for the previous year. Since the tax-filing due date for an employer could be much later than the Form 5498 reporting deadline (i.e., May 31), it could result in a reporting nightmare with respect to the timing in which SEP and SIMPLE contributions are made for a particular year.
In support of this reasoning, the IRS states in its 2023 Form 5498 reporting instructions for Box 8: “Enter employer contributions made to a SEP IRA (including salary deferrals under a SARSEP) during 2023 including contributions made in 2023 for 2022, but not including contributions made in 2024 for 2023. Trustees and issuers are not responsible for reporting the year for which SEP contributions are made.” Additionally, the Box 9 reporting instructions state: “Enter contributions, including deferrals, made to a SIMPLE IRA during 2023. Trustees and issuers are not responsible for reporting the year for which SIMPLE contributions are made.” In comparison, Box 1 which reports traditional IRA regular contributions, reads “Enter contributions to a traditional IRA made in 2023 and through April 15, 2024, designated for 2023.”
The deadline for most individuals to make an IRA regular contribution for 2022 was April 18, 2023, and contributions made from January 1, 2023, through April 18, 2023, designated for 2022 should have been reported on a 2022 IRS Form 5498. However, SEP and SIMPLE IRA contributions made during the same period, or any time during 2023, will be reported on a 2023 IRS Form 5498, regardless of the tax year (i.e., 2022 or 2023) for which they were made.For an opportunity to learn more about IRAs and other tax-advantaged accounts including Health Savings Accounts and Coverdell Education Savings Accounts, consider the Wolters Kluwer IRA Library or on-demand video training offered on a variety of topics. Go here to learn more about training opportunities available to you, or you can call us at 1-800-552-9408.