Fair market valuations (FMVs) are required by the IRS for the assets in your retirement plan. The valuations must be assessed as of the end of the income tax reporting year. You’re not allowed to complete these valuations yourself—you must request a qualified, independent third party to provide them. So, 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 your retirement plan owns.
- 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.
- You must have an independent, neutral, qualified party complete the valuation, and 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)
- Based on our Custodial Agreement, a Fair Market Value of each asset owned by your IRA is due on a yearly basis.
Are You a Client of Advanta IRA?
Here’s how our reporting process works for you:
Our IRS Form 5305 Agreement with you requires that you provide the valuation, not Advanta.
You must submit your FMVs to us by March 15, 2019. 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: firstname.lastname@example.org.
This article was initially published on December 11, 2017 and has been updated for accuracy.