It’s that time of year again. Fair market valuations (FMVs) are required by the IRS for the assets in your retirement plan. These valuations must be assessed by end of the income tax reporting year. You may be allowed to perform certain valuations yourself, but it is encouraged that a qualified, independent third-party provide the valuation. So, don’t wait until the last minute—now is the time to start making moves to get it done.
The Basics of Fair Market Valuations
- Separate valuations must be made on each asset in your retirement plan.
- Values are assigned as of December 31st of the reporting year.
- The value of your asset(s) is determined based on the fair market value (not the cost) of the asset at the time of the assessment.
- It is encouraged that an independent, neutral, qualified third-party complete the valuation. This person must not be considered a disqualified person relevant to your retirement plan.
- You are not required to pay for a valuation. However, if payment is necessary, it must be paid by the retirement account and not by you personally.
FMVs are reported using IRS Form 5498 and must include the following information:
- Recharacterization amounts (incurred in the transfer of any part of the contribution, including earnings, from one IRA to another)
- Conversions (to a Roth IRA from a traditional, SEP, or SIMPLE IRA)
- Rollovers to a traditional or Roth IRA, including qualified rollover contributions to a Roth account
- Contributions to your account (certain eligibility requirements apply depending on the type of your account, employee vs. employer contributions, contribution deadlines for your account, etc.)
- Required minimum distributions are stated for the upcoming year (if you are eligible)
Are You a Client of Advanta IRA?
Here’s how our reporting process works for you:
Based on our Custodial Agreement, you as the account holder are required to provide a Fair Market Value for each asset owned by your IRA. This is an annual requirement and is based on the value of each asset as of 12/31 of the reporting year.
You must submit your FMVs to us by March 15, 2021. You must also include any supporting documents (property appraisals, balance sheets, etc.). Each FMV must be signed by you and the person/entity who performed the appraisal.
Advanta IRA is required to report this information on your behalf to the IRS each year your account is actively open with us and we provide you with a Form 5498 for your records.
Please note: Clients of Advanta IRA receive this form from us, but if you had accounts with another retirement plan custodian for part of the tax-reporting year (before you became our client) you should receive a form from your previous plan administrator, as well. As the account owner, you are responsible for ensuring all information on the form(s) is current and correct.
Please contact Advanta IRA if you have any questions regarding FMVs, IRS rules governing these reports, and our role in the process. We cannot assist in determining the value of our clients’ assets, but we can answer questions and explain the process and requirements to you. Feel free to contact your account manager at 800-425-0653 or email us at: [email protected]
This article was initially published on November 15, 2019, and has been updated for accuracy.