With Tax Day in the rear view mirror, you can begin to focus on making the rest of 2018 as lucrative as possible for your self-directed IRAs. However, we haven’t closed the books on 2017 just yet. You’ll be receiving a Form 5498 for each of your accounts in the coming weeks. These documents will be issued to you and directly to the IRS, meaning you won’t have to make a separate filing.
Form 5498s provide three key pieces of information:
By law, New Direction IRA must report a fair market value (FMV) for every account under our administration once per year. Form 5498 communicates this value to the IRS. As such, self-directed investors must obtain FMVs from qualified individuals or entities that specialize in their particular asset types. For example, a certified real estate appraiser could provide an FMV for an IRA-owned property. Precious metals investors—whose assets bear broadly accepted and readily available market values (spot prices)—are under no obligation to elicit the services of a third party for FMV purposes.
FMV information must be submitted to our office no later than December 31 to ensure accurate account information on your annual account statements and your Form 5498s.
Your Form 5498 will also describe any IRA deposits made in 2017. These include rollover contributions, for which you should have received a corresponding Form 1099 from your resigning custodian. If, for instance, you rolled funds from a 401(k) to a Traditional IRA, your 401(k) administrator would report the distribution via Form 1099 and New Direction IRA would report the subsequent contribution via Form 5498. By reporting the offsetting amounts, you can be confident that the IRS won’t collect taxes on the cash or assets that left your 401(k); the Form 5498 will affirm that those holdings arrived in another qualified account within 60 days and are therefore not taxable.
If you executed an IRA-to-IRA transfer in 2017, the transaction will not be reported as a rollover and will be excluded from your Form 5498 accordingly (apart from any transferred sums that contribute to the overall FMV of your account).
2017 marks the first tax year in which the specific asset classes of your self-directed investments will be reported on your Form 5498. A code in Box 15b. will provide this information (i.e. Code "D" indicates “Real Estate”). Please review official instructions provided by the IRS for a full list of these codes.
For more information about how your alternative IRA investments will be represented on your Form 5498, please don’t hesitate to contact our office.