Every year, IRA account administrators are required to file Form 5498 on behalf of their clients. Form 5498 reports the fair market value (FMV) of the IRA as of December 31st of every year to you and the IRS.. You can find the form here.
With the growing popularity of self-directed retirement plans, the IRS has put these plans more squarely on its radar; a couple of years ago, it added a box to Form 5498 that is meant for self-directed accounts or “certain specified assets.” This appears to signal that the government is more interested in tracking non-publicly traded alternative assets (which are invested within these accounts) more closely. As detailed on the participant instructions sheet of the form, these assets include long- or short-term debt obligations, real estate, ownership in an LLC or similar entity, ownership in a partnership, trust or similar entity, and “other assets that do not have a readily available FMV.”
Declare the Fair Market Value of Your Self-Directed IRA
As noted, Form 5498 reports the FMV of your self-directed retirement account as of December 31st of every year. Custodians or administrators then have until June 1st of the following year to file the appropriate IRS reports (using Form 5498) on behalf of all their clients’ retirement plans. Participants/clients are also required to get statements that reflect the FMV of the assets in their retirement plans (custodians/administrators must provide the report to their clients).
Hire a Third-Party Professional to Value Your IRA
In order to correctly report fair market value of the assets within the self-directed account, it is imperative that investors have each separate nontraditional asset valued by a third-party ; this may be an accountant or CPA, an appraiser (depending on the asset) or a valuator. The value may also be reported by an officer of a corporation or other entity.This valuation must be calculated as of December 31st and reported as soon as possible so that account administrators can meet the IRS deadlines for reporting.
We are aware that many valuations are done in the new year so our office requests submission by March 31st. Given that Form 5498 has a section for “certain specified” assets, the IRS is more diligent about requiring these valuations.
Have Questions about Valuation Requirements? Ask Next Generation Trust
If you have any questions regarding Form 5498 and the valuation requirements concerning the nontraditional investments in your self-directed IRA, our professionals are always available with the answers. Contact our team at Assets@NextGenerationTrust.com or 888.857.8058. You can read more about Form 5498 and the latest filing rules on the IRS website.