By Ian Berger, JD
IRA Analyst
With all the tax changes made by the 2025 One Big Beautiful Bill Act (OBBBA), it’s no surprise that the IRS has made significant changes to the 2025 Form 1040 and supporting schedules and forms. Near the beginning of each year’s 1040 instructions, the IRS includes a section titled “What’s New” that summarizes the tax changes in effect for that year and how they are reflected on the 1040. The “What’s New” section in the 2025 instructions contains 25 items.
One of those items says the following: “Write-in information. Beginning in 2025, most of the words, codes, and/or dollar amounts that are used to explain an item of income or deduction, and that you previously had to enter next to a specific line, now have a dedicated checkbox or entry space.”
This change affects the reporting of IRA and retirement plan distributions on lines 4 and 5 respectively of Form 1040. Line 4a is used to report IRA distributions, while line 4b reports the portion of those distributions that is taxable. Similarly, line 5a is used to report plan distributions, while line 5b reports the taxable portion.
If the taxable portion of an IRA or plan distribution (as reported on lines 4b and 5b, respectively) is smaller than the amount of the IRA or plan distribution (as reported on lines 4a and 5a), the IRS wants to know why. In prior years, you (or your tax software) were required to explain the difference by entering a code word next to line 4b or 5b.
For example, if all or part of an IRA or plan distribution was rolled over, “Rollover” had to be entered next to line 4b or 5b. If you did a qualified charitable distribution (QCD) from your IRA, you had to enter “QCD” next to line 4b. A QCD is a tax-free direct transfer from an IRA to a qualified charity when you are age 70½ or older. If you made a health savings account funding distribution (HFD), you were required to enter “HFD” next to line 4b. An HFD is a one-time tax-free direct transfer of IRA funds to your HSA. Finally, if you are a retired public safety officer and you used part of your retirement plan distribution to make tax-free health insurance or long-term care insurance premium payments, “PSO” had to be entered next to line 5b.
For the 2025 Form 1040, the IRS has added new lines 4c and 5c, which mostly contain boxes to be checked instead of having to write in a code on the form. Line 4c includes a box for “Rollover” (Box 1), another for “QCD” (Box 2), and a blank box (Box 3). The 1040 instructions indicate that Box 3 should be checked and “HFD” should be entered next to Box 3 if you made an HFD. Box 3 should also be checked and a word or code should be entered next to Box 3 if another IRS instruction requires it.
Line 5c includes a box for “Rollover” (Box 1), another for “PSO” (Box 2), and a blank box (Box 3). Box 3 should be checked and a word or code should be entered next to Box 3 if another IRS instruction requires it.
What if more than one item applies? The IRS instructions say to check a box for each item and include a statement showing the amount of each item (for example, “Line 4b – $1,000 Rollover and $500 HFD.”).
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
https://irahelp.com/youll-need-to-report-certain-ira-and-retirement-plan-distributions-differently-on-this-years-form-1040/