What is a fair market valuation?
The IRS requires owners of all retirement plans, self-directed or not, to report the fair market value (FMV) of assets held in the account(s) at the end each year. One valuation form must be completed for each asset your plan(s) holds. The worth of your asset(s) is assigned based on an estimate of market value at the time of valuation, not cost. Hence, the term fair market value.
Am I able to assign the value to my own assets?
No. You must have an independent, neutral person or entity to do so—someone who has no disqualifying relationship with you or your retirement plan. For example, and depending on what assets your IRA holds, an attorney, CPA, or a financial planner could complete FMVs of your assets. If your investments are in real estate, a certified property appraiser, the county tax assessor, or other licensed real estate professional would suffice. For this type of asset, we will accept the annual tax notice so long as the value on the tax bill is a “market” or “just” value.
Does my self-directed IRA pay for the cost of valuations?
If the valuation has an expense, then yes, your IRA should pay the cost of that valuation. This is considered an expense relevant to the account and you are not personally allowed to pay the cost. However, it is not required that you pay for a valuation if you are able to obtain it at no additional cost.
Who sends my FMV to the IRS?
Advanta IRA submits this information relevant to your accounts with us to the IRS on your behalf.
What is the process in submitting FMVs to Advanta IRA?
We request FMVs be submitted to us no later than March 15, 2015 so IRS reporting is accurate, current, and completed by the proper filing deadlines (which can vary depending on your account structure and type).
- As stated above, one form is required for each asset in your plan(s).
- It is critical that each form is signed by you AND the qualified person who performed valuation of your asset(s).
- Any supporting documents (i.e., property appraisals, balance sheets, etc.) should be submitted with the FMV.
To ensure compliance with IRS regulations, Advanta IRA requires you to send us a FMV of your assets relevant to your accounts with us, assigning the value of each as of December 31st of the reporting year. We request from you and then submit this information on your behalf to the IRS each year you hold account(s) with us and provide you with a Form 5498 for your records.
What is Form 5498?
This is a document the IRS uses to record the FMV of your assets, as well as to report the following:
- 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; includes 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)
Where do I get Form 5498?
If your accounts are held with Advanta IRA, you will receive this form from us. If your accounts were with another administrator for part of the tax-reporting year, before you became our client, you’ll also receive a form from your previous retirement plan administrator. You are responsible for ensuring all information on the form is current and correct.
Advanta IRA is here to help.
If you have any questions regarding FMVs, IRS rules governing these reports, and Advanta IRA’s role in the process, please contact us. While we cannot assist in determining the value of your assets, we can answer any questions and fully explain the process and requirements to you. For assistance in this realm, please contact Our office at 800.425.0653 for your account manager, or email us at: [email protected]
Download Advanta IRA’s FMV form and guidelines.
If you are a current client of Advanta IRA Services download our fair market value form and accompanying instructions.
Advanta IRA clients can also download the FMV form and guidelines by visiting our Fees Schedule page on our web site.
These documents provide detailed instructions on how to provide us with the proper information critical to reporting the value of assets in your self-directed IRAs and similar accounts. The instructions are particularly informative and outline different types of assets that require valuation reports.
If you have questions regarding this article or wish to learn more about self-directed IRAs, please contact us.