Each fall, STRATA reminds self-directed IRA owners about important deadlines that may affect 2023 taxes—and that may help you get a leg up for 2024 opportunities. As always, remember to seek competent advice when making decisions that may affect your tax obligations.
1. FILE YOUR 2023 TAX RETURN IF YOU HAVE AN EXTENSION
Most taxpayers normally file their tax returns by April 15 each year. An automatic six-month extension is available, so the deadline in this case is usually October 15. (If filing deadlines fall on weekends or legal holidays, the deadline is moved to the next day.) Some victims of federally declared disasters may have later deadlines.
2. RECHARACTERIZE YOUR 2023 IRA CONTRIBUTION
Recharacterizations allow you to move a Traditional IRA contribution into a Roth IRA or vice versa. This can be done until October 15—even if you have already filed your tax return. Recharacterization permits IRA owners to move assets from one type of IRA to another, often to take advantage of a tax benefit. For instance, you may discover that you earned too much to take a 2023 deduction for your Traditional IRA contribution. But if you are eligible to contribute to a Roth IRA, you could recharacterize your Traditional IRA contribution as a Roth IRA contribution. Recharacterizations may require you to amend your tax return.
3. CORRECT A 2023 EXCESS IRA CONTRIBUTION
If you contributed more to your Traditional or Roth than you were permitted for 2023, you should remove the excess (and earnings) by October 15 to avoid the 6% excise tax.
4. ESTABLISH AND FUND A SEP IRA PLAN FOR 2024
If you own a business, you may be able to establish a Simplified Employee Pension (SEP) plan and make contributions by your tax-filing due date. A SEP plan is like an IRA-based profit sharing plan that allows you to make substantial contributions for you and any employees that are eligible.
5. ESTABLISH AND FUND A SIMPLE IRA PLAN FOR 2024
A SIMPLE IRA plan is like an IRA-based 401(k) plan: eligible employees may contribute their own earnings into the plan, and the employer makes either a matching contribution or a profit sharing-type contribution. To adopt a plan for the current year, you must establish it by October 1, 2024, in order to give employees at least three months to defer into the plan.
6. FUND A SIMPLE IRA PLAN FOR 2023
If you already have a SIMPLE plan, you must make your matching or nonelective (profit sharing) contributions by your tax return due date, plus extensions. So if you have an extension, you may normally make employer contributions to a SIMPLE IRA plan until October 15. (Employee deferrals must be deposited by the end of the month following the month in which the compensation was paid.)
7. REQUEST IN-KIND TRANSFERS & DISTRIBUTIONS
You can transfer or distribute your IRA assets at any time. But starting the process well before the end of the year will help ensure that the transaction is completed in 2024. For example, if you want to re-register a hard-to-value IRA asset (or distribute it without liquidating it), it may take some time for the custodian to process this request.
8. PLAN TO TAKE YOUR 2024 RMD
If you have reached the age at which you must take required minimum distributions (RMDs), you normally have until the end of each year to take them. (In your first RMD year, you have until April 1 of the following year.) If you have multiple IRAs, you can aggregate your RMDs and take them all from one IRA. This may help you avoid having to liquidate assets in your self-directed IRA to satisfy the RMD.
9. CONSIDER A ROTH IRA CONVERSION
Roth IRAs present a great opportunity for tax-free growth—and they are not subject to RMDs during the Roth IRA owner’s lifetime. Converting your existing Traditional IRA assets to a Roth IRA may be worth considering even though you’ll have to pay tax when you distribute the Traditional IRA assets. Because a conversion starts with a distribution, think about starting the process soon if you want to include the additional tax liability in 2024.
10. DO SOME GOOD WITH A QUALIFIED CHARITABLE DISTRIBUTION (QCD)
Once you reach age 70½, you can make a tax-free contribution of up to $105,000 (2024 indexed amount) to your favorite charity. The QCD will offset any RMD that you must take, and you don’t have to itemize your deductions in order to take advantage of this benefit. Any QCD must be paid directly from the IRA custodian to the qualifying charity. Your tax advisor can give you the details.
NEXT STEPS
Consider taking action on these 2024 IRA deadlines and requirements to proactively manage your retirement savings. You can find more deadline information in Your 2024 IRA Calendar. If you have any questions, feel free to contact our self-directed IRA experts for guidance.
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