Are spillover or throwback dividends included in previous year IRA fair market value (FMV)
I have Schwab IRA’s and they do not send out a 5498 in May showing FMV if no contributions are made nor do they send out in January a FMV statement for my IRA’s. I have spillover and throwback dividends (dividends paid in early 2025 that were declared in 2024). IRS makes it clear that the 1099DIV must have the dividend reported taxable in the year it was declared, not when it is paid but I cannot find where IRS states that the IRA FMV must include dividends paid in the following year. Schwab states to use the year end account statement which does not include the spillover or throwback dividends for the FMV but also has a fine print note:
Your fair market
value and RMD calculated amount may need to be adjusted to include any transfers, rollovers,
recharacterized contribution or security pricing correction after 12/31 of the prior year. But, there is no way to verify what Schwab is sending to IRS for the FMV. The statement also states not to use the statement for tax purposes but certainly using the statement to derive the RMD from the statement FMV would be just that.
I cannot find where IRS states that the broker must send by January 31st the final updated FMV. I cannot find where IRS states that Schwab does not have to send a 5498 if no contribution is made. To me, the 1099 / 5498 instructions are clear that I am entitled to an updated FMV that is being sent to IRS. I cannot find where IRS does or does not require a spillover or throwback dividend be included in the IRA FMV.
Permalink Submitted by Alan - IRA critic on Wed, 2025-03-12 14:48
You don’t get a 5498, but Schwab must send one to the IRS showing the year end FMV per the 5498 Instructions.
The Dec statement shows the “ending value on 12/31/2024” which you will note does not include accrued income. It also does not include dividends not yet paid, even if they would have been taxable in 2024 had they been in a taxable account.
There is also a “take my RMD” tab on the website that indicates the amount of your 2025 RMD and it is calculated using that “ending value on 12/31/2024”.
The IRS RMD Regs state that any contributions made to the account after the valuation date but in the valuation year are to be added, but because the Schwab year end statement is valued as of 12/31 there is no time gap in which such a contribution could be made.
There is also a rule that any outstanding rollovers or recharacterizations must be added to the year end balance for RMD calculation. This prevents a taxpayer from taking a distribution in Dec and rolling it back in Feb, temporarily reducing the year end balance. That distribution must be added back.
In short, you don’t have anything to worry about related to inaccuracy of the statement year end balance except for the above paragraph.
Permalink Submitted by JeffCT on Wed, 2025-03-12 16:11
Thank you for your quick response. I guess I don’t understand why Schwab is not sending me a copy of the 5498 they are sending to IRS either in the beginning of the year or in May which also shows the RMD but just to confirm, the spillover dividends will not be added to the year-end value?
Thanks again,
Permalink Submitted by Alan - IRA critic on Wed, 2025-03-12 16:53
Correct, they will not be added.
I just noticed that on my Schwab year end statement, 2nd to last page, it shows both my 2024 RMD and the 2025 RMD amounts, but not the year end value. To determine the year end value they used multiply the RMD figure by your RMD divisor.