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ComplianceTax & AccountingApril 15, 2022

SEP and SIMPLE IRA Plans: 2021 contribution reporting on IRS Form 5498

Overview

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 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 Plan IRA contributions are reported vs. how prior year IRA regular contributions are reported.

Reporting SEP and SIMPLE Plan contributions

IRA custodians/trustees report SEP and SIMPLE contributions on IRS Form 5498, IRA Contribution Information. Box 8 reports amounts contributed to a SEP IRA and Box 9 reports amounts contributed to a SIMPLE IRA. However, 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 2022 for 2021 will be reported on a 2022 Form 5498 (not a 2021 Form 5498), even though an employer deducts the contribution on its 2021 income tax return. Another way to state this is the 2021 Form 5498 will include all SEP and SIMPLE contributions made during calendar year 2021 which could include contributions made for tax years 2021 and 2020. 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 as late as 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 (May 31), this could result in a reporting nightmare with respect to reporting late and corrected Forms 5498 for the later SEP and SIMPLE contributions.

In support of this reasoning, the IRS states in its 2021 reporting instructions for Box 8: “Enter employer contributions made to a SEP IRA (including salary deferrals under a SARSEP) during 2021 including contributions made in 2021 for 2020, but not including contributions made in 2022 for 2021. 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 2021. 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 2021 and through April 18, 2022, designated for 2021.”

Conclusion

The deadline for an individual to make a 2021 IRA regular contribution is fast approaching, and contributions made from January 1, 2022 through April 18, 2022 designated for 2021 will be reported on a 2021 IRS Form 5498. However, SEP and SIMPLE IRA contributions made during the same period, or any time during 2022, will be reported on a 2022 IRS Form 5498, regardless of the tax year (i.e., 2021 or 2022) 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.
Senior Specialized Consultant, Tax Advantaged Accounts
With more than 36 years of experience, Steve has worked closely with hundreds of financial organizations to help them create, implement, and maintain their tax-advantaged accounts program. Steve also has an extensive background in working with employer qualified plans.
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