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.
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.