The IRS Wants a New View of Your IRA
Individual Retirement Accounts have gained new interest in the eyes of the both Department of Labor and the Internal Revenue Service. With the new definition of Fiduciary Regulation, the majority of the conversation today centers on “what the DOL is doing.” But every owner of an IRA needs to know that there is new interest in the value of your IRA. That new interest is being driven by the Internal Revenue Service and there are fine points to consider for the owner of an IRA.
Interest in Your Individual Retirement Account
As more Americans reach (or approach) age 70 ½, each septuagenarian with an Individual Retirement Account now becomes a guaranteed source of tax revenue based upon the Required Minimum Distribution (RMD) rules. RMD rules dictate that upon reaching age 70 ½, IRA holders are required to begin taking partial distributions from their account, and each subsequent year, until the account is depleted. The result being, that at the end of the period, the once deferred-taxes on the entire account will be fully collected.
The new interest from the IRS centers around the process of valuing IRA accounts and the reporting of account valuations.
Starting with tax year 2015 – which is calendar year 2016 filing – IRA custodians must value, maintain and report the existence of any assets which are difficult to value. This may include hedge funds, natural resources, real estate or any odd-ball-asset where a current market value is difficult to obtain.
Starting with the 2015 tax year, the IRS is increasing enforcement and controls by requiring that the IRA custodian establish and disclose the existence of any IRA accounts that are difficult to value. Form 5498 includes the market value of an IRA account.
Form 1099-R will carry the information of whether a distribution is required, and the amount of any distribution.
What Does this mean for 401(k) Plan Participants?
In all likelihood, not very much. Few 401(k) Plans rarely offer difficult-to-value assets to participants within their investment lineup. The use of hard-to-value assets is unusual in structures which offer daily liquidity frequent investment changes. The hard-to-value assets are normally sold within private wealth accounts or Individual Retirement Account structures.
