1099-R, Box 5

Disclaimer: The content is drawn from a variety of sources, including (but not limited to) articles, Internal Revenue Code and Regulations, Court cases, articles, and other unofficial resources. 

There are just some things that are a continuing annoyance. Take, for example, Form 1099-R, box 5, an amount chock full of confusion. What’s really in here? 

This seems to come up every tax season. While preparing training materials, I dug deep into the Form 1099-R instructions to the preparer of this document to figure what “Employee Contributions/Designated Roth Contributions or Insurance Premiums” really means. 

Here’s the nitty gritty (sorry, I’ve been around a long time). 

Box 5 may include any of the following: 

• Contributions actually made on behalf of the employee over the years under the plan that were required to be included in the income of the employee when contributed (government speak for after-tax contributions) 
• Contributions made by the employer but considered to have been contributed by the employee under section 72(f) 

Accumulated cost of premiums paid for life insurance protection taxable to the employee in previous years and in the current year under Reg §1.72-16 (cost of current life insurance protection) (only if the life insurance contract itself is distributed) – this has to do with life insurance on the life of an employee as part of a qualified employee plan 

• Premiums paid on commercial annuities 

For qualified plans (401(k) and 401(a)); 403(b) plans (Tax Sheltered Annuities); and nonqualified annuities (not contained in an IRA or other retirement plan), Box 5 contains employee contributions (after tax) or insurance premiums recovered tax fee during the year. Huh?! Well, what it really means this the part that wasn’t included in Box 2a, the taxable part of the distribution. 

If distributions are from a Roth IRA, then then there will be a separate 1099-R, Box 5 issued to the taxpayer. 

If the distribution is the entire account balance, then Box 5 contains the total employee contributions or insurance premiums that are being recovered tax-free (which means a return of after-tax contributions and not included in Box 2a). Box 5 will not contain any amount previously distributed tax-free. 

The aggravating part: If the issuer can’t figure out the taxable part, they can leave both Box 2a and Box 5 blank! They just check Box 2b (taxable amount not determined) leaving the preparer stranded. 

OK, I do have a summary, if there’s something in Box 5. The tax software will undoubtedly pester you to plug in an amount. So, input the Box 5 amount but the program won’t do anything with it. Its merely an information box – useless if you ask me!