As the end of the year approaches, it’s essential to stay informed about financial responsibilities and requirements. In this blog post, we’ll address some frequently asked questions (FAQs) regarding Required Minimum Distributions (RMDs), Fair Market Valuations (FMVs), end-of-year statements, and tax forms to help you navigate your financial obligations effectively.
Required Minimum Distributions (RMDs)
What are Required Minimum Distributions (RMDs)?
Required Minimum Distributions (RMDs) are mandatory withdrawals from your Individual Retirement Account (IRA) or other qualified retirement plans. These distributions are triggered when you reach a specific age and must be taken annually to avoid penalties.
When do RMDs start?
The Secure Act introduced changes to the RMD age. Initially, it was 70 ½, but The Secure Act increased it to 72, and The Secure Act 2.0 further extended it to 73, with a future adjustment to age 75. If you turn 72 before December 31st, 2022, your RMD age is 72. If you turn 72 after this date, it becomes 73.
What if I turn 72 in 2023?
If you turn 72 in 2023, your first RMD must be taken by April 1, 2025, based on your account balance on December 31, 2023. Subsequent RMDs must be taken by December 31 of each year. Be sure to submit your distribution request no later than December 31st at 11:59 pm.
What if I turned 72 in 2022?
If you turned 72 in 2022, your first RMD was due by April 1, 2023, based on your account balance on December 31, 2021. The second RMD should be taken by December 31, 2023, based on your account balance on December 31, 2022. Like other RMDs, subsequent distributions should be completed by December 31st each year.
Which accounts are subject to RMD rules?
RMD rules apply to Traditional, SEP, and SIMPLE IRAs (NOT ROTH IRAs), as well as qualified plans like 401(k), 403(b), and 457(b) plans.
Can I get help calculating my RMD?
NDTCO can assist you in calculating your RMD by directing you to the FINRA RMD calculator and providing your December 31st balance.
How is RMD reported for tax purposes?
Your RMD will be reported as taxable income on your 1099 in the calendar year it is requested. If you choose to delay your first RMD until April 1st, you will take your second distribution in the same year, by December 31st. Both distributions will be reported on the same 1099.
Fair Market Valuations (FMVs)
What are Fair Market Valuations (FMVs)?
FMVs must be completed annually as required by the IRS. These valuations determine the value of certain investments in your account, which is then reported on Form 5498.
How can I complete my annual FMV?
To complete your annual FMV, NDTCO requires clients with Privately held investments (excluding precious metals or public securities) to log in to the client portal, complete the Valuate form for each Private investment, and submit supporting documentation. This ensures accurate reporting of your investments on Form 5498.
What if I don’t provide an annual valuation?
Repeated failure to provide an annual valuation may result in NDTCO resigning as the custodian of your IRA.
End of Year Statements
When are end-of-year statements available?
NDTCO publishes end-of-year statements for clients on the client portal’s Documents section, typically by mid-February.
Can I generate my own statement at any time during the year?
Yes, clients can generate statements for any desired period by using the Generate Statement tool found on the Overview page of the portal. You can choose a specific timeframe for the statement, and it will be generated in PDF format at no cost.
Tax Forms: 1099 and 5498
What are the different tax forms, and when can I expect them?
NDTCO provides various tax forms, including 1099-R, 1099-Q, 1099-SA, and 5498. These forms report distributions, contributions, and fair market values for different types of accounts. They are typically mailed by January 31st of each year, and electronic copies are available in the client portal’s Documents section.
What if I need a correction on my tax form?
If you believe a correction is necessary, contact NDTCO via the Client Portal Messaging System. Corrections may take a few weeks during the 1st quarter of the year, but they are rarely needed.
What if my asset has no value and is reported on my statement or Form 5498?
If you believe an asset has no value, check your client portal messaging center for any updates or requests for documentation. You can also log in and follow the appropriate steps to update the value or provide documentation for the investment.
Does NDTCO charge for mailing tax forms?
No, NDTCO does not charge for mailing tax forms. They will be sent to clients and are available electronically in the client portal.
How can I access my tax forms electronically?
You can access your tax forms electronically by logging into your client portal and navigating to the Documents page, where you’ll find tax forms, end-of-year statements, and annual administration fee invoices.
Can I access an End of Year Statement before NDTCO officially delivers them?
Yes, you can generate an End of Year Statement for any desired period by using the Generate Statement tool in your client portal, except on mobile devices.
As you approach the end of the year, keeping these FAQs in mind will help you stay on top of your financial responsibilities and ensure a smooth transition into the new year. If you have specific questions or concerns, don’t hesitate to reach out to NDTCO for assistance through the Client Portal Messaging System.
Please note that the contents of this blog are accurate as of the date of publication and are provided for informational purposes only. They are not intended, and should not be construed, as financial, legal, or other professional advice. Readers are encouraged to perform their own due diligence and should always consult a qualified financial professional before making any investment decisions.