Balancing & Transmitting Instructions for 5498, 5498-ESA and 5498-SA Files

System Management System Management Balancing & Transmitting Instructions for 5498, 5498-ESA and 5498-SA Files

This document outlines the procedures for balancing and transmitting Form 5498, 5498-ESA, and 5498-SA files using the FLEX system. Adherence to these instructions is crucial for timely and accurate IRS reporting.

Important Considerations

  • IRA Contribution Deadline: Members have until the federal income tax filing and payment deadline to make an IRA contribution for the tax year.
  • Telnet Session Requirement: All tax balancing procedures must be completed using a Telnet session.
  • FLEX Reporting Deadlines:
    • For credit unions reporting with FLEX, all transmission notifications must be received by FLEX by 5:00 PM (MDT) on Tuesday, April 22, 2025.
    • Data received after this date will be considered late and subject to penalties.
  • Corrections:
    • Corrections made after the due date may not be accepted by FLEX or the IRS due to time constraints.
    • Accepted late corrections by FLEX will incur additional fees.
    • Corrections for fewer than 250 forms: Must be completed manually by the credit union.
    • Corrections for more than 250 forms: Must be filed electronically with the IRS.
  • Third-Party Processors (e.g., Ascensus):
    • If utilizing a third-party reporting service, contact them directly for their specific deadlines, mailing, or transmission instructions.
    • FLEX does not retain processing information for third-party services like Ascensus.

Step 1: Verify Tax Information

This step ensures that your credit union’s payer and transmitter information is accurate within the FLEX system.

  1. Access Telnet Session:
    • Type GO TAX5498 on the command line.
    • Press Enter.
  2. Maintain C.U. Tax Information:
    • Select Option 3 (Maintain C.U. Tax Information).
  3. Verify Payer Information:
    • Confirm that the Payer Information displayed is correct for your credit union.
  4. Verify Transmitter Information (for FLEX Reporting):
    • If FLEX performs your government reporting, the Transmitter Information must appear as follows. Missing information will prevent file processing.
      • Transmitter Code: 97567
      • Name Line #1: Computer Marketing Corporation
      • Name Line #2: Attn: Tax Department
      • Mailing Address: 8520 S. Sandy Parkway
      • City, State, Zip: Sandy, UT 84070
  5. Verify Transmitter Information (for Third-Party Processors):
    • If utilizing a third-party processor (e.g., Ascensus), enter their appropriate Transmitter Information. Incorrect or missing information will result in file rejection by the third-party provider.

Step 2: Run Reports

This step identifies any errors or incompatibilities in your tax data that require correction before final reporting.

  1. Access 5498 Error Listings:
    • From the TAX5498 menu, select Option 1 (5498 Error Listings).
    • Note: This option must be run prior to April reporting, even if previously completed earlier in the year, to ensure a clean reporting process.
  2. Review Exception Reports:
    • This option generates two exception reports:
      • Bad Tax Address Report
      • Detail Listing of Invalid IRA Contributions for the Tax Year
    • The detail listing highlights data incompatibilities on credit transactions against appropriate group codes.
  3. Understand Reason Codes:
    • Reason codes are provided at the bottom of the report to explain identified issues:
      • Invalid IRA Code: Indicates the code is not found or is inconsistent with being a contribution.
      • IRA Code V incompatible with share/cert type: Indicates a share or certificate type identified as a Non-Roth group.
      • Lor K Code used after April deadline: Indicates the effective date is not within the allowed contribution period for “Last Year” contributions.
      • SEP without Contribution Type defined: Indicates a missing indicator for Employee (EE) or Employer (ER) on the item.
    • Important: All transactions with IRA code 5 will be ignored, as this code signifies a Direct Internal Transfer, which is exempt from reporting.
  4. Correction Requirement:
    • ALL exception items must be corrected PRIOR to proceeding to Step 4 (selecting Option 5 for reporting).

Step 3: Correcting Invalid Contributions

This step details the process for identifying and correcting discrepancies in IRA contributions.

  1. Access IRA History by Selected IRA Code:
    • From the TAX5498 menu, select Option 2 (IRA History by Selected IRA Code).
    • This option generates a listing of all historical transactions for the reporting period coded with the selected IRA code.
    • The listing can be displayed on the screen or sent to a printer.
    • The report includes: account, suffix, sequence number, transaction description, actual date, effective date, teller ID, transaction code, IRA code, and SEP (employer or employee) code (if applicable).
    • This report is useful for balancing and finding discrepancies.
  2. Review IRA Code 9 (Transfer to Spouse Incident To Divorce):
    • If IRA Code 9 is used in FLEX, the contribution will be reported as a contribution to a qualified plan and will appear in Box 2 on IRS Form 5498.
    • If this is not the intended reporting, change the IRA Code from 9 to 5 to prevent it from being reported to the IRS.
  3. Correcting Discrepancies:
    • If discrepancies are found, follow these steps for correction:
      • Access IRA/HSA Maintenance under the Shares menu in the FLEX Main Menu.
      • Enter the account number requiring correction.
      • Highlight the suffix needing correction and press Select.
      • Highlight the appropriate reporting year the transaction occurred and select History.
      • Highlight the line item in IRA History for the code that needs correcting and select Detail.
      • Highlight the specific transaction needing correction and select Edit.
      • Make the necessary corrections to the IRA code and/or Tran Type.
      • Note: For SEP contributions, ER indicates Employer Contribution, and EE indicates Employee Contribution.
  4. Rerun Error Listings:
    • Option 1 (5498 Error Listings) must be rerun after corrections until ALL records have been corrected and no exceptions remain.

Step 4: Detail Transaction Reports and Reporting Files

This step involves creating the final contribution files for IRS reporting after all corrections have been made.

  1. Create Contribution Files:
    • From the TAX5498 menu, select Option 5 (Create 5498/5498-ESA/5498-SA Contribution Files (Apr)).
    • This option prompts for additional information to be included in the T record, which is required in IRS reporting files. Verify this information is correct for your credit union.
    • For Third-Party Providers: If reporting with Ascensus or another third-party provider, contact them directly to determine this information.
  2. Error Message Handling:
    • If any exceptions for bad addresses or invalid IRA codes have not been properly corrected, the following message will appear:
      • Return to TAX5498 menu to run Error Listings and make corrections, as needed. Rerun Option 5 (Create 5498-5498-ESA/5498-SA Contribution Files (Apr)) to create new detail reports and contribution files.
    • Important: FLEX cannot be held responsible for inaccurate reporting if Option 5 is not taken following any changes made to reporting information.
    • Return to Step 2 and Step 3 to resolve all errors, then rerun Option 5.
  3. Report Generation:
    • After all exceptions have been properly corrected, Option 5 will produce three reports in the User Data field:
      • CR5498
      • CR5498ESA
      • CR5498SA
    • These reports detail contributions for traditional IRA accounts, Roth IRA accounts, rollover contributions, Education IRA contributions, HSA contributions, and FMV (Fair Market Value) figures.
    • Note: If incorrect information is discovered on these reports, make corrections (referencing previous steps as needed) and rerun Option 5. A new report will be generated, and the updated file will be copied to the FLEX drive.
  4. File Creation and Location:
    • This option also creates three reporting files:
      • F5498.IRS
      • F5498E.IRS
      • F5498SA.IRS
    • These files are automatically copied to the i: Drive and placed in the TAX5498.24 folder.

Step 5: Transmitting Reporting Files

This final step involves transmitting the generated government reporting files to FLEX or your designated third-party processor.

For Credit Unions Reporting with FLEX:

  1. Email Notification:
    • Send an email to FLEX to notify them that your April 5498 tax reporting files are completed.
    • Subject Line: Indicate your credit union name.
    • Email Address: taxeoy@cmcflex.com
  2. File Retrieval:
    • Receipt of your email will trigger FLEX to retrieve the files from your system for government reporting.
  3. Record Keeping:
    • Retain a copy of this email notification for your records to support any questions regarding the timing and availability of your data file.
  4. Transmission Deadline:
    • All transmission notifications must be received by FLEX by 5:00 PM (MDT) on Tuesday, April 22, 2025.
  5. Late Submissions:
    • Any data received after April 22, 2025, will be considered late and processed under the following provisions:
      • A $150.00 late fee will be assessed.
      • FLEX will process late files on a first-in/first-out basis, following files received on or before the deadline.
      • FLEX will make a best effort but cannot guarantee on-time IRS reporting for data received after Thursday, April 25, 2025. This could subject the credit union to fines or penalties imposed by the IRS.

For Credit Unions Reporting with Ascensus or Another Third-Party Processor:

  1. Contact Third-Party Processor:
    • Once tax balancing is complete and 5498 tax files are created, contact your third-party processor directly.
    • Determine their specific instructions for uploading or transmitting 5498 tax files.
  2. File Location:
    • The necessary data for reporting is located in the TAX5498.24 folder on the i: Drive.
    • This data is generated according to standard IRS regulations.

Still Have Questions?

FLEX is committed to making your government balancing and reporting process as easy as possible. If, after reviewing this documentation, you have any remaining questions, please feel free to contact FLEX Tax Support.