December 2018
January 31, 2019 Deadline
January 31, 2019 is a Thursday and it is
the deadline for furnishing three required
IRA forms. An IRA custodian/trustee must
furnish (i.e. mail, email, fax or personally
deliver) the following to its IRA account
holders and its inheriting IRA beneficiaries.
If this deadline would be missed, the
IRS may assess the fines discussed within
the article.
2018 Form 1099-R
Any person (accountholder or beneficiary)
who received a distribution(s) from
an IRA totaling more than $10 for the
year must be furnished a 2018 Form
1099-R
.
This Form 1099-R must be prepared on
a per plan agreement basis. That is, if a
person would have two traditional IRAs
and one Roth IRA, then he or she must
be furnished three Form 1099-Rs. In
addition, there must be a Form 1099-R
prepared for each applicable distribution
code. For example, if a person has a traditional
IRA and one distribution
required the use of Code “1”, one the
use of code “3” and one the use of Code
“7”, then three Form 1099-Rs must be
furnished.
When an individual receives more
than one copy of the Form 1099-R, then
it is mandatory for the IRA custodian/
trustee to insert a unique number in the
account number box located in the
lower left hand corner of the form. Even
though there will be times when furnishing
this account number is not required,
the IRS encourages IRA custodians/
trustees to voluntarily furnish it. This
account number allows the IRS to
process the submissions of any corrected
forms.
If the IRA custodian would fail to timely
furnish a 2018 Form 1099-R or furnishes
one prepared with errors, then
the IRS may assess a fine of $270 per
form (times two).
Fair Market Value (FMV) statements
An IRA custodian must furnish a FMV
statement to each IRA accountholder and
each inheriting beneficiary having a balance
as of December 31, 2018, to each
IRA accountholder who died during
2018, and to any IRA accountholder who
made a reportable contribution for 2018
during 2018. The deadline to furnish the
FMV statement is January 31, 2019.
This FMV statement must be prepared
on a per plan agreement basis. That is, if
a person would have two traditional IRAs
and one Roth IRA, then he or she would
need to be furnished three FMV statements.
These could be combined on one
statement as long as there were three
separate sections.
There must be a sentence on the statement
informing the recipient that the
FMV information (Balance as of December
31) will be furnished to the IRS when
the 2018 Form 5498 will be filed with
the IRS in May of 2019.
The IRA Custodian/trustee may, but is
not required, to furnish contribution and
earnings (including interest) information
on the FMV statement for traditional
IRAs, SEP-IRAs and Roth IRAs. However,
a special rule applies for SIMPLE-IRAs. In Rs, 2018 FMV statements, and 2019
RMD Notices by January 31, 2019 or it will be subject
to being fined by the IRS the case of a SIMPLE-IRA, the IRA custodian must furnish
a detailed statement listing all contributions (dates,
and amounts) made by the employer on behalf of the
SIMPLE-IRA accountholder.
Why is it required to furnish the FMV statement? A
taxpayer who has basis within a traditional IRA, SEPIRA
or SIMPLE-IRA needs the FMV for purposes of completing
the Form 8606 to determine the taxable portion
of a distribution and the nontaxable portion.
The IRS may assess a penalty of $50 for each failure
to furnish the FMV statement for traditional IRAs, SEPIRAs,
and Roth IRAs. The penalty is $100 PER DAY for
failing to furnish the FMV statement for a SIMPLE-IRA.
RMD Notice for 2019.
An IRA custodian/trustee must furnish each traditional/
SEP/SIMPLE-IRA accountholder who was born on or
before June 30, 1949 and who has a balance as of
December 31, 2018 with an RMD Notice. This RMD
notice must be furnished to ALL such accountholders
and not only to those individuals who attain age 70½ in
2019. The 2019 RMD notice is not required to be furnished
to an individual who only attains age 70 in 2019
(i.e. born between July 1, 1949 and December 31,
2049).
There is no requirement and no need to furnish an
RMD Notice to a Roth IRA accountholder since the
RMD rules do not apply to a Roth IRA accountholder
while he or she is alive
.
Three items must be set forth in the required RMD
Notice.
First, the deadline applying to the specific IRA
accountholder must be set forth. This will be December
31, 2019, for an individual who is older than age 70½
in 2019 or April 1, 2020, if the individual does attain
age 70½ in 2018. Second, there must a sentence
informing the individual that the IRS will be told on the
2018 Form 5498 that he or she is subject to the RMD
rules for 2019. Third, the individual must be informed
of his or her RMD amount for 2019 or that such amount
has not been calculated, but will be if the individual
contacts the IRA custodian/trustee and requests that the
calculation be made.
Although the RMD laws apply to an inheriting IRA
beneficiary of all four types of IRAs, current IRS rules do not require the IRA custodian/trustee to furnish an RMD
notice. CWF strongly suggests you do so. The model IRS
IRA forms require that there be an RMD distribution
made to an inheriting beneficiary. A beneficiary who
fails to take an RMD will owe the 50% tax and may
well argue that the custodian/trustee should pay some
of this tax for its failure to notify or payout a RMD.
The IRS may assess a fine of $50.00 for each time an
IRA custodian/trustee fails to furnish a complying RMD
notice.
In summary, an IRA custodian/trustee must furnish the
2018 Form 1099-Rs, 2018 FMV statements, and 2019
RMD Notices by January 31, 2019 or it will be subject
to being fined by the IRS.