Trying to understand Form 5498 for reporting non-deductible IRA contributions

The fair market value (FMV) on Form 5498 isn't something you need to manually report on your tax return, but it's still important information. The IRS receives this directly from your financial institution. The FMV is used for several purposes. First, it helps the IRS verify required minimum distributions (RMDs) when you reach that age. Second, it helps track the growth of pre-tax vs after-tax contributions when you eventually withdraw. And third, it's used to calculate if you have excess contributions. Your tax software is correctly asking only for your non-deductible contributions (your basis), not the total account value. When you eventually withdraw from this IRA, you'll pay taxes only on the earnings portion, not on the return of your non-deductible contributions. That's why tracking your basis year after year is so important. Think of it like this: the Form 5498 is more for the IRS's information tracking than for your immediate tax calculation. You're doing it right by just reporting your non-deductible contributions!

After struggling with the same Form 5498 questions for years, I finally found an amazing tool that makes this so much easier. I used https://taxr.ai last month when I was confused about how to handle my multiple IRAs with both deductible and non-deductible contributions. The service analyzed my 5498 forms and explained exactly what I needed to enter in my tax software. What I love is that it showed me how the basis is calculated year after year and explained why the fair market value is reported to the IRS but not directly entered in my tax return. It literally saved me hours of research and confirmed I'd been doing it correctly for years (though I was always anxious about it).

I have to share my experience with https://taxr.ai after my skeptical question earlier. I decided to give it a try since I had such a complicated IRA situation with contributions going back to 2018, some deductible and some not. I uploaded my stack of 5498 forms and my old 8606 forms, and wow - it laid everything out perfectly! It clearly showed me my actual basis (which was about $3,200 less than what I thought - apparently I had been making calculation errors for years). It even created a year-by-year breakdown showing exactly how my basis changed. The guidance was super specific to my situation and clarified exactly what I needed to enter in each field of my tax software. I feel so much more confident now about my IRA reporting. Honestly wish I'd found this years ago!

If you're still confused about your Form 5498 or have other IRS questions, I'd highly recommend using Claimyr (https://claimyr.com). I was trying to reach the IRS for weeks about a similar IRA basis issue and couldn't get through. The hold times were ridiculous - I'd wait 2+ hours and then get disconnected. I was super frustrated until I found Claimyr, which got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly how to report my non-deductible contributions and explained why the fair market value on the 5498 is something they track but I don't need to report directly.

I need to eat my words about Claimyr from my skeptical comment earlier. After another failed 3-hour attempt to reach someone at the IRS about my IRA basis questions, I decided I had nothing to lose and tried it. I was absolutely shocked when I got a call back in 20 minutes connecting me to an actual IRS representative. The agent was super helpful and walked me through exactly how to handle my non-deductible IRA contributions on Form 8606. She also explained why the fair market value reported on Form 5498 matters for their records but doesn't directly impact my tax return calculations. Apparently the IRS uses the FMV to verify required minimum distributions and to track potential excess contributions. I've been trying to get this information for weeks, and finally got clear answers. Definitely worth it for anyone struggling to get through to the IRS.

One thing I learned about Form 5498 that nobody mentioned yet - if you do a Roth conversion, the FMV becomes super important! I had a similar situation with non-deductible traditional IRA contributions, but then I converted some to Roth. Since I had a mix of deductible and non-deductible contributions in my traditional IRA, the FMV was used to determine how much of my conversion was taxable. Basically had to use the pro-rata rule based on the total value of all my IRAs (using the FMV from 5498), not just the amount I converted. Really messed up my taxes that year because I didn't understand this.

Maybe I'm just dumb but is anyone else annoyed that we have to track our non-deductible contributions ourselves? Like, the IRS gets the 5498 showing our contributions AND the total value, why can't they just calculate this for us?? I made non-deductible contributions like 8 years ago and now I have no idea what my basis is supposed to be. Lost all my old tax docs in a move. 😭

You're absolutely not alone in feeling frustrated by this! The IRS tracking system is honestly pretty outdated - they get all the raw data but don't provide the calculations we actually need as taxpayers. For your situation with the lost documents, Gabriel's suggestion about requesting old tax returns is spot on. But here's another tip that might help: if you had the same financial institution for your IRA over those 8 years, try calling them first. Many brokerages can provide historical contribution summaries going back several years, which might be faster than waiting for IRS transcripts. Also, if you used tax software like TurboTax or H&R Block in previous years, they often store your old returns online. You might be able to log into your old account and download your Form 8606 from previous years to reconstruct your basis. The whole system definitely needs modernizing - other countries handle this much more efficiently by calculating taxes for their citizens instead of making everyone figure it out themselves!

This is such a helpful thread! I've been dealing with the same confusion about Form 5498 and non-deductible IRA contributions. What really clicked for me after reading everyone's responses is that the Form 5498 serves multiple purposes - it's not just about what I need to report on my current tax return, but also creates a paper trail for the IRS to track things like RMDs and conversions down the road. @Eli Wang - your original question really resonated with me because I had the exact same confusion about why the fair market value gets reported if we don't use it directly. Now I understand it's more about the IRS having complete records of account growth over time. One thing I'd add for anyone in a similar situation: make sure you're filing Form 8606 every single year you make non-deductible contributions, even if your tax software doesn't explicitly prompt you for it. I almost missed this one year because I was using a different tax program that didn't walk me through IRA basis tracking as clearly. That form is crucial for maintaining your basis records with the IRS, and it's what will protect you from double taxation when you eventually withdraw those contributions.