5498s
Are institutions (e.g., Schwab) required to generate 5498s on Roth IRAs/Regular IRAs when there aren’t contributions in that year given that they report year-end FMV in addition to contributions? Some institutions appear to be generating the 5498 for clients when there isn’t activity in the account and others aren’t. Where there isn’t activity and a 5498 isn’t sent to account holder, are they still reporting market value info to IRS?
Permalink Submitted by Alan - IRA critic on Fri, 2014-05-30 17:43
No and Yes respectively. Custodian reporting is done through variable combination of Form 5498 and annual required statements. Some may use the 5498 exclusively, others only in certain situations and yet others may primarily use customized statements to report most of what is required. Requirements are the FMV and applicable RMD info by 1/31 and contribution info by 6/2. Taxpayers should be told what is being sent to the IRS in all cases, but when statements are being used, the IRS may receive the info in different form and at a different time than the taxpayer does. The IRS 5498 Inst do not organize this info effectively. Also see http://www.retirementdictionary.com/definitions/224/form5498orirsform5498or5498
Permalink Submitted by unknown on Fri, 2014-05-30 18:14
Schwab says they don’t report roth ira year-end fmv to irs. we also don’t see comment about reporting on the 12/31/13 statement. does that make sense?
Permalink Submitted by mk foss on Fri, 2014-05-30 21:01
IRS uses the year end balance information for determining the amount of RMDs. Since the Roth has no RMD (during the lifetime of the owner and spouse), the year end balance shouldn’t be necessary. Edward Jones for example does report the year end balance on a Roth Form 5498.
Permalink Submitted by Joe Luby on Mon, 2014-06-02 17:10
1) Yes, IRA trustees are required to file Form 5498 for every IRA in their care every year regardless of whether any contributions were made to the account. They are not required to provide a copy of the actual Form 5498 to the client, although they must provide the client with the same information contained on the Form 5498. So while the client may not receive a copy of the Form 5498, it should have been filed with the IRS by the trustee. 2) In the event that the trustee does not provide a copy of the Form 5498 to the client, then they must provide the client with the required information (i.e., year-end FMV, RMD information, etc.) in some other format by the end of January each year. If the trustee uses the December 31 account statement to meet their reporting obligations to the client then the statement must contain a legend advising the client specifically what information is being provided to the IRS (via Form 5498 which the client is not receiving in this instance). If contributions were made to the account, then the contribution information must also be provided to the client by June 1st. 3) Schwab must report year-end FMV for all IRAs, including Roth IRAs. They must report the information on Form 5498 to the IRS and to the client via a copy of Form 5498 or some other method as described above. 4) Year-end balance information is necessary for a number of reasons in addition to RMD calculations. For example, if a prohibited transaction occurs in the Roth IRA that falls under the penalty provision requiring the account to be deemed distributed and subject to tax and penalty, such deemed distribution occurs on January 1st of the year of the prohibited transaction. The deemed distribution is typically based on the 12/31 valuation. So the year-end FMV is required regardless of whether the account is a Roth IRA or other RMD considerations. 5) Jason, I would appreciate an opportunity to connect with you on this issue and have some additional questions. Please contact me at your convenience at [email protected]. Thank you – Joe