Dec 20

When Do I need to take My Required Minimum Distributions (RMD) From My IRA?

The terms of an independent retirement account or annuity must include several minimum distribution rules, which Congress imposed to ensure that IRAs are primarily used as retirement savings media, not as vehicles to build wealth for transmission to heirs. As discussed below, these rules provide separately for distributions to IRA owners and distributions to beneficiaries after the death of an IRA owner. An IRA owner is an individual who establishes and contributes to an IRA for the benefit of himself or herself and his or her beneficiaries.

When Do I need to take My Required Minimum Distributions (RMD) From My IRA?Minimum distributions to IRA owners

An IRA must, by its terms, require the account or annuity to be fully distributed not later than April 1 of the year following the calendar year during which the IRA owner attains age 70 and 1/2 or be distributed by annual or more frequent payments over a period beginning by that date and continuing not longer than for the owner’s life, the lives of the owner and his or her beneficiary, or a period not longer than the life expectancy of the owner or the owner and beneficiary. April 1 of the year following the calendar year during which the owner reaches age 70 and 1/2 is the required beginning date.

How are minimum distribution requirements satisfied in the case of multiple Traditional IRAs?

Minimum distributions must be determined separately for each IRA. If an individual is owner of more than one IRA, however, the sum of the minimum distributions from all of them may be satisfied by distributions from any of them. This aggregation rule generally applies only to IRA owners. It does not allow an IRA held as beneficiary to be combined with other IRAs, whether held as owner or as beneficiary. However, two or more IRAs held as beneficiary of the same decedent may be aggregated if minimum distributions are being determined under the same life expectancy rule. IRA distributions cannot satisfy distributions under Internal Revenue Code Section 403(b) contracts and vice versa. Also, distributions from Roth IRAs cannot satisfy minimum distribution obligations under a traditional IRA or an Internal Revenue Code Section 403(b) contract.

What do I need to report when making a minimum IRA distribution?

Trustees, custodians, and issuers of IRAs (trustees) must make reports on minimum distributions to IRA owners and the IRS. If a minimum IRA distribution is required for a calendar year as of the beginning of which the IRA owner (or a surviving spouse who has elected to be treated as owner) is alive, the trustee holding the IRA as of December 31 of the preceding year must provide a statement to the owner by January 31 of the distribution year. The statement must indicate that a minimum distribution is required for the year, state the date by which the distribution must be made, and either state the amount of the distribution (calculated assuming that the sole beneficiary of the IRA is not a spouse more than 10 years younger than the IRA owner) or offer to compute the amount. The statement must also inform the owner that this information will be provided to the IRS. A trustee must also file Form 5498 (IRA Contribution Information) with the IRS for each calendar year for which a minimum distribution is required. This form need not state the amount of the minimum distribution.

No reporting to beneficiaries or the IRS is required with respect to IRAs of deceased owners. Also, although the minimum distribution rules for IRAs generally apply to Internal Revenue Code Section 403(b) contracts, no reporting is required with respect to such a contract, whether the employee is living or dead.

Please contact one of our IRA Experts at 800-472-0646 for more information.

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Mar 14

Changes to IRS Form 5498 with Regards to Your Self-Directed IRA

For Tax Year 2015 and beyond on IRS Form 5498, the IRS now requires IRA custodians to separately specify transactions which involve certain Self-Directed IRA investments

The information on Form 5498 is submitted to the Internal Revenue Service by the trustee (IRA custodian) of your individual retirement arrangement (IRA) to report contributions, including any catch-up contributions, required minimum distributions (RMDs), and the fair market value (FMV) of the account.

The IRS Form 5498 gives the market value of all assets and cash held within the client account for the previous year and is used for tax reporting.  The IRA custodian will forward IRS Form 5498 to the IRS electronically by May 31 of the current year for the previous year.

Changes to IRS Form 5498 with Regards to Your Self-Directed IRAFor Tax Year 2015 and beyond, the IRS now requires IRA custodians to separately specify transactions which involve certain types of investments with no readily available fair market value that are held inside a tax deferred retirement account. These investments have no readily available fair market value and include, but are not limited to, non-publicly traded stock, private partnerships or LLC interests, real estate, options, and other hard-to-value investments.  The IRS updated the IRS Form 5498 to include new Boxes 15a and 15b. The fair market value of investments in the IRA will be reported in Box 15a. Box 15b will be used to categorize the types of investments listed in Box 15a through the use of the following category code(s):

A – Stock or other ownership interest in a corporation that is not readily tradable on an established US or foreign securities market.

B – Short- or long-term debt obligation that is not traded on an established securities market.

C – Ownership interest in a limited liability company or similar entity (unless the entity is traded on an established securities market).

D – Real estate.

E – Ownership interest in a partnership, trust, or similar entity (unless the entity is traded on an established securities market).

F – Option contract or similar product that is not offered for trade on an established US or foreign option exchange.

G – Other asset that does not have a readily available fair market value.

H – More than two types of assets (listed in A through G) that are held in the IRA.

The IRS has indicated that these reporting change are a result of the IRS trying to get a better handle on the type of IRA assets that are being purchased with IRA funds and get a better handle on what percentage of IRA assets should be considered ‘hard-to-value’ assets.  The IRS has some concern that certain IRA assets’ fair market values are not being reported accurately. The fair market value of an IRA asset is very important to the IRS because that is what a tax would be imposed on when distributions are taken by the IRA holder.  With the total IRA assets valued at close to $8 trillion dollars as of 2016, making sure IRA holders are paying their fair share of taxes on their IRA distributions are vital.

For more information on the IRS Form 5498 changes and its impact on your Self-Directed IRA, please contact a self-directed IRA specialist at 800-472-0646.

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May 11

New Podcast – New IRS Form 5498 And Its Potential Impact On IRS Audits Involving Self-Directed IRA Accounts

IRA Financial Group’s Adam Bergman discusses IRS Form 5498 and the potential impact on IRS audits involving Self-Directed IRAs.

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Dec 11

IRS Seeks to Learn More About IRA Alternative Asset Investments for Valuation Purposes

2015 IRS forms 5498 & 1099-R to seek more details on types of IRA Investments

Due to the increase in popularity of the self-directed IRA structures, the IRS is looking to gain more information on the types of investments being made by IRAs in order to make sure that these IRA accounts are being properly valued when it comes to taking required minimum distributions or doing Roth conversions. In 2015, the IRS has modified IRS forms 5498 & 1099-R in order to get a better handle on the type of assets the IRA holds so it can better evaluate IRA account values. In 2015, both forms will now request information concerning the type of investments the IRA holds, including whether it is made non-publicly traded stock, partnership or limited liability interest, real estate, options, or other hard-to-value investments. IRA account values are very important to the IRS as IRA distributions generate a significant source of tax revenues for the IRS and Treasury. “The new IRS Form 5498 and 1099-R requirements are a way for the IRS to make sure that that IRA holders are properly valuing their IRAs and paying their fair share of tax based on fair market valuations, “ stated Adam Bergman, a tax partner with the IRA Financial Group. According to Mr. Bergman, based off the new changes to IRS Forms 5498 & 1099-R, it appears that the IRS wants all assets to be fairly valued for all taxable events, including Roth IRA conversions and for in-kind IRA distributions to the account owner. Because both of these IRA events are taxable, the IRS believes that inaccurate valuations are costing them potential tax revenues and they believe that new reporting rules will help reduce this from happening. “One actual benefit of the new IRS reporting rules regarding IRA valuations is that now it will be much easier to show your IRA has decreased in value, which will help potentially reduce the tax liability on a Roth conversion or distribution.

IRS Seeks to Learn More About IRA Alternative Asset Investments for Valuation Purposes IRA Financial Group’s “checkbook control” Self-Directed IRA, also called a real estate IRA with checkbook control, is an IRS approved structure that allows one to use their retirement funds to make real estate and other investments tax-free and without custodian consent. The Self-Directed IRA LLC involves the establishment of a limited liability company (“LLC”) that is owned by the IRA (care of the Roth IRA custodian) and managed by the IRA holder or any third-party. As manager of the IRA LLC, the IRA owner will have control over the IRA assets to make the investments he or she wants and understands. According to Mr. Bergman, “ some people are incorrectly stating that the new reporting rules is a way for the IRS to crack down on “checkbook control” structures, which is clearly not the case. The new reporting rules are solely based on the IRS focus on valuing alternative assets owned by IRAs, that is why they also will be amending the IRS Form 1099-R, which is the form which reports conversions or distributions. In fact, IRS Form 1099-R includes a new code “K”, which will allow one to report a distribution from an IRA with no readily available value. “Although the new changes to the IRS Form 5498 & 1099-R, will provide the IRS more information about the types of IRA investments, specifically whether the investment is traditional or alternative, the focus of the IRS is purely on making sure IRAs are being properly valued and not whether they are using an LLC to make the investment, “ according to Mr. Bergman. “If the transaction is not violating the IRS prohibited transaction rules then there is really nothing for an IRA holder to worry about regarding the IRS Form 5498 & 1099-R new rules, “ stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control” Self Directed IRA Facilitator. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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