End-of-Year Matters to Start Thinking About Now

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2020 has been a historic year, and it's already winding down. The fall season is a good time to consider your self-directed IRA, 401(k), and/or HSA for end-of-year account contributions and other timely planning decisions. Below we discuss a few topics savers need to know.

The CARES Act

Enacted earlier this year in response to COVID-19, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) introduced a series of 2020-only measures to mitigate the financial impact of the pandemic on taxpayers. Specifically, the CARES Act:

  • Waives 2020 required minimum distribution (RMD) obligations.
  • Waives early distribution penalties on withdrawals made for COVID-related expenses.
  • Allows account holders to pay taxes on distributions taken for COVID-19 expenses to be paid over the course of the following three years. These taxes can be avoided entirely if the distributed balance is re-contributed to the account within the following three years.

These special circumstances will end in 2021, meaning:

  • RMDs will be required for pre-tax account holders age 72 or above (not applicable to ROTH IRAs).
  • Early distributions will again carry 10% penalties on top of any applicable taxes.
  • Taxes owed from a distribution will be due in the tax year the distribution is made. However, and as is the current law, account holders have 60 days to return the distributed balance to a qualified account to avoid taxes.

Remember, there’s still time to take advantage of the CARES Act if doing so will help you meet your financial goals, but the clock is ticking.

Fair Market Values

Self-directed accounts that hold certain assets must be valued on an annual basis. Unlike stocks, ETFs, and mutual funds, which are valued on a daily if not real time basis, most alternative investment options are not frequently priced. Real estate, private equity positions, and account-owner LLCs are examples of assets that require a valuation by the account holder.

To submit a fair market valuation:

  1. Seek the services of an individual or entity that is qualified to value your account’s asset.
  2. Request and receive valid supporting documentation to affirm the valuation. To be valid, this must be official documentation from your valuator. E-mail communications, advertisements, and Schedule K-1s do not constitute valid supporting documents.
  3. Submit the fair market value information by logging into your client portal, finding the asset on your Overview screen, and choosing “Valuate” from the right-hand column. Provide the requested information and upload your supporting documentation on this page.

Note precious metals and private notes for not require FMVs. In a similar manner to stocks, precious metals carry public “spot prices” to value gold, silver, platinum, and palladium owned by your account. A private note is automatically assigned the value of the remaining balance owed.

Keep Up to Date

The end of the year is also a great time to reflect and consider potential impact on your NDTCO accounts.

  • Have you moved and need to update your contact information, such as email address, mailing address, and/or phone number?
  • Would you like to change your beneficiary information?
  • Have you gained an interest in a new type of investment that you would like to learn more about?
  • Have you made the maximum contribution for the year? Unlike some other matters addressed here, you’re not under the December 31 gun if you still want to make a 2020 contribution; you actually have until April 15, 2021 (the tax filing deadline) to contribute for this tax year.

Feel free to check the status of your account at any time by logging into the online client portal. If you have any questions about your account or would like to learn more, you can easily send us a message via the portal or reach out at any time.

Stay in Touch!

Give us a call at 877-742-1270 or send us an e-mail at info@ndtco.com if you ever have questions or concerns about your self-directed account. The end of the year will be here before we know it and our representatives are here to help!