Yes! You can use AI to fill out Instructions for Forms 1099-R and 5498

The distribution codes in Box 7 are critical as they inform the IRS about the nature of the distribution and whether early withdrawal penalties apply. Filers often select an incorrect code due to the complexity of the rules, such as using Code 7 (Normal Distribution) for a participant under age 59 ½ instead of Code 1 (Early distribution, no known exception). An incorrect code can trigger an automatic IRS notice assessing penalties and interest, forcing the recipient to dispute the tax. If the form is only available as a non-fillable PDF, tools like Instafill.ai can convert it into an interactive, fillable version to streamline data entry and validation.

Filers frequently enter the same value in Box 1 (Gross Distribution) and Box 2a (Taxable Amount) out of habit, which is often incorrect. For example, a direct rollover has a taxable amount of $0, and distributions involving after-tax contributions have a non-taxable portion. This error can cause the recipient to overpay taxes on funds that should be tax-free. To avoid this, always calculate the taxable portion separately and verify the rules for specific distributions like rollovers.

A direct rollover should be a non-taxable event, but reporting errors can make it appear taxable to the IRS. Common mistakes include entering the rolled-over amount in Box 2a (Taxable Amount) instead of $0, or failing to use the correct distribution code (Code G) in Box 7. These errors can trigger an incorrect tax bill and require lengthy correspondence with the IRS to prove the transaction was a tax-free rollover. Intelligent form-filling tools like Instafill.ai can help prevent these errors by automatically applying the correct reporting rules for rollovers.

Returning excess contributions or deferrals from a retirement plan requires special reporting on Form 1099-R that is often handled incorrectly. Filers may use a generic distribution code instead of the specific codes for corrective distributions (e.g., Code 8 or P) or mistakenly report the entire returned amount as taxable instead of just the earnings. This leads to incorrect tax assessments for the recipient. It is crucial to follow the specific instructions for corrective distributions to ensure only the correct amount is reported as taxable for the correct year.

When a distribution is made to a beneficiary from a deceased participant's account, filers sometimes mistakenly issue the Form 1099-R under the decedent's name and Taxpayer Identification Number (TIN). The form must be issued in the name and TIN of the beneficiary who received the funds, and Box 7 must include Code 4 (Death). This error creates a mismatch in IRS records, leading to processing delays, compliance notices, and tax issues for both the estate and the beneficiary.

When a participant defaults on a retirement plan loan, it is often treated as a 'deemed distribution' that must be reported with Code L in Box 7. Filers frequently confuse this with a 'plan loan offset,' which is an actual distribution, or fail to report the deemed distribution entirely. This error can affect the participant's tax basis in the plan and lead to incorrect tax calculations on future distributions. Carefully distinguishing between these events is essential for accurate reporting.

IRA contributions for a given tax year can be made until April 15 of the following year, but trustees sometimes report these contributions for the year they are received, not the year designated by the participant. For example, a contribution made in February 2026 for the 2025 tax year might be wrongly reported as a 2026 contribution. This error can cause the participant to lose their intended tax deduction or be flagged for exceeding annual contribution limits. Trustees must accurately record and report the designated contribution year.

Form 5498 has separate boxes for different funding sources, such as regular contributions (Box 1), rollovers (Box 2), and Roth conversions (Box 3). A common data entry mistake is to lump different types of contributions into a single box, such as reporting a rollover as a regular contribution. This misrepresentation can cause the IRS to incorrectly flag the participant for making excess contributions, leading to penalties. Automated systems and smart form-fillers like Instafill.ai can help ensure data integrity by guiding users to enter different transaction types into the correct fields.

Trustees are required to check Box 11 on Form 5498 if the IRA participant has an RMD due for the following year. This serves as a critical notification for the account owner. Forgetting to check this box is a common oversight that can cause the participant to miss their RMD, resulting in a steep penalty for the participant. Diligent tracking of participant ages and RMD eligibility is necessary to avoid this simple but costly mistake.

For IRAs holding assets without a readily available market value (e.g., private equity, real estate), Form 5498 requires reporting the FMV in Box 15a and an asset code in Box 15b. Trustees may omit this information or use an outdated valuation because obtaining an accurate annual appraisal is difficult. This compliance failure can lead to IRS scrutiny and penalties, as an accurate FMV is essential for calculating RMDs and properly valuing the account.