Avoiding Common IRA Reporting Pitfalls

Tax season has a way of shining a spotlight on the details, and when it comes to IRAs, those details matter. Most reporting rules are straightforward, but the timing of contributions, distributions, rollovers, and fair market value reporting can create confusion for many IRA owners.

The good news? Most mistakes are preventable with a little awareness and strong communication with your custodian. Below, we walk through the errors we see most often and how to stay ahead of them.

Failing to tell your custodian about a carryback contribution

Many IRA owners make carryback contributions between January 1 and April 15 for the previous tax year. This is common for taxpayers who wait to confirm income levels, Roth eligibility, or Traditional IRA deductibility before making their contribution.

But here’s where trouble begins: if you don’t tell your IRA custodian that the deposit is intended for the prior year, it will be reported as a current-year contribution on IRS Form 5498.Because custodians file Form 5498 in late May, they rely on your instructions to assign contributions to the correct tax year. Ensure you clearly indicate which tax year the contribution should be applied to so the IRS receives accurate information. STRATA’s Deposit Certification form allows accountholders to apply the full contribution to one year or split the amount between tax years.

Not understanding rollover reporting

Rollover contributions are reported on IRS Form 5498 (specifically in Box 2). Here’s where things can get confusing: Form 5498 isn’t sent to taxpayers—or to the IRS—until the end of May. That’s long after most people have already filed their tax returns. Because of this timing gap, many IRA owners unintentionally fail to report their rollovers correctly.

Example:
In June 2025, Robb took a $10,000 distribution from his IRA and rolled it over within the 60‑day window. In January 2026, he’ll receive an IRS Form 1099‑R showing the distribution. But his Form 5498, which confirms the rollover, won’t arrive until late May 2026. Since Robb usually files his tax return in March, the 5498 always shows up after the fact.

1. A rollover always starts with a distribution. It doesn’t officially become a rollover until the money lands in another eligible plan or IRA. Because distributions must be reported to the IRS, the taxpayer must show both the distribution and the rollover on their return. When the entire distribution is rolled over, there’s no tax due.
2. In Robb’s case, he’ll report the $10,000 distribution on line 4a of Form 1040 or 1040‑SR, enter “0” on line 4b for the taxable amount, and check the “Rollover” box on line 4c. Even though Form 5498 arrives months later, it will validate the rollover with the IRS.
3. If Robb forgets to report the rollover, or if the details on his tax return don’t match what eventually appears on Form 5498, the IRS may send him a Notice of Deficiency claiming he owes tax (and possibly penalties). Clear reporting helps avoid these kinds of unwelcome surprises.

Rolling over a distribution across two tax years

Now let’s look at a twist on Robb’s situation. What happens if he takes his IRA distribution in December 2025 but doesn’t roll it over until January 2026?

This kind of year-spanning rollover is common, but it requires a small extra step. The IRS instructions for Form 1040 explain that if you take a distribution in one year but complete the rollover in the next, you should include a brief statement describing what you did.

So, for Robb’s December‑to‑January rollover, a simple one-sentence explanation attached to his 2025 return is usually all that’s needed. Still, when in doubt, it’s wise to get advice from a qualified tax professional.

Not complying with FMV reporting requirements

Every IRA must report its fair market value (FMV) annually on Form 5498. For traditional publicly traded investments, this is simple. But for SDIRAs invested in alternative assets, an accurate valuation isn’t always as easy to obtain.

For investors whose IRAs hold cash, publicly traded securities, or exchange-traded precious metals, FMV is easy to determine because market prices are readily available. However, when your SDIRA holds alternative assets—such as real estate, private companies, notes, or private equity—determining FMV requires additional care and documentation. In these cases, accurate valuations are not just helpful; they are essential.

If an FMV is required for your STRATA account, we will contact you with clear next steps and outline the specific documentation needed based on the assets held in your IRA.

To help SDIRA investors understand what’s required, STRATA offers a clear overview of annual valuation expectations in our knowledge base article.

In short:

• SDIRA owners are responsible for ensuring their custodian receives a valid year‑end FMV.

• If the investment sponsor does not provide one, an independent valuation may be required.

• Reporting deadlines matter—custodians must receive FMVs early enough to meet IRS reporting deadlines.

Failing to communicate with your SDIRA custodian

Most IRA reporting issues arise not from complex IRS rules but from small communication gaps. That’s why reviewing your tax forms early—and reaching out quickly if something looks off—can save time, frustration, and corrections later.

A good practice is to carefully review your Form 1099‑R when you receive it. Because custodians send these forms to the IRS at the end of March, there’s a short window where corrections can be made before the IRS receives the original filing.

Whether you need help verifying FMVs, reporting rollovers, or simply understanding what a form means, our team is here to support you. For IRS reporting questions, visit our Self-Directed IRA Knowledge Center or explore our Client Support pages with guidance tailored to private investments, real estate, and precious metals.