Year-end maintenance for an IRA LLC is not extensive, but there are a few things you need to be aware of – mostly having to do with the IRA account itself.
Annual Valuation Report
The custodian for your IRA is required to report annually the Fair Market Value (FMV) of your LLC to the Internal Revenue Service. It is your responsibility as the manager of the LLC to provide them with this value.
The fair market value is the price at which the LLC would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, assets and holdings of the LLC. The Fair Market Value may be an estimate of the value, but you are solely responsible for any such estimate and any tax consequences arising there from.
The FMV of your LLC is calculated by adding the value of all assets owned by the LLC, less any liabilities. If you own a property worth $125,000 financed with a mortgage with an outstanding balance of $45,000, then the LLC’s equity (value) is $80,000. If you also have a brokerage account in the LLC with a statement balance of $15,000, the total value of the LLC you should report would be $95,000.
Generally speaking, realtor price opinion (realtor comps) is a sufficient means to value real property holdings. If you need assistance valuing your IRA LLC, please consult with your tax advisor such as a CPA or attorney.
If your IRA is subject to minimum distribution requirements, the valuation form must be signed and attested to by a licensed professional (CPA, appraiser, etc) knowledgeable about the holdings and business of your LLC. This condition will apply if you are over age 70 1/2 with a tax-deferred IRA, or holding an inherited IRA from which distributions are required.
You should receive a notification of this Valuation requirement from your IRA account custodian in early December. The valuation is due by January 10th if you wish to have it reflected on the annual return form 5498 filed on behalf of your IRA.
Roth Conversion Deadline
If you are considering a Roth IRA conversion from a tax-deferred IRA or 401(k), the conversion must take place prior to December 31st in order to be considered a tax event for the calendar year. You will have until April 15th to pay the tax associated with the conversion.
Required Minimum Distributions
If you are required to take distributions from your IRA account, those distributions must be taken by December 31st or penalties will apply. Account holders with a tax-deferred IRA (Traditional/Rollover, SEP or SIMPLE) who are over age 70 1/2 are required to take such annual distributions. You may also have to take a distribution from an inherited IRA whether it is tax-deferred or has Roth IRA tax treatment – depending on who it was inherited from and their age when they passed on. If your account is subject to RMD’s, you should have received a notice from IRA Services Trust Co early in the year notifying you of the minimum amount you must distribute for the year.
If your IRA LLC paid a vendor that is not a corporation more than $600 during the year, you will need to issue a 1099-MISC to those vendors to report that income. The deadline to deliver forms to recipients is published annually by the IRS, and is generally in February. This is a good time to identify those parties you may need to generate a 1099-MISC for and ensure that you have a current W-9 form from them.
Consult with your tax advisor to determine if any LLC vendors need to have a 1099-MISC issued to them, and if you need assistance generating your plan’s forms.