Stay on track with your retirement saving and investment goals by staying informed and setting one beneficial goal for your self-directed IRA each month. Some months you must take steps to maintain the tax-qualified status of your IRA. Other months you can manage administrative and planning tasks to make sure you’re achieving your investment and saving targets. STRATA’s IRA calendar can help you meet your IRA deadlines and responsibilities throughout the year.
Watch for important documents from your IRA custodian in January. Review them to make certain they are accurate; they will affect your tax liability for 2021 or future years. By January 31, you should receive the following information, which may be provided in one or more deliveries:
- Fair Market Value Statement – Your IRA custodian must report the value of your IRA as of the prior December 31st. If your IRA holds alternative investments that don’t have a readily attainable fair market value, you must provide a valuation to your IRA custodian each year before the custodian must file fair market value information with the IRS.
- RMD Notice – If you will be age 72 or older in 2022, your IRA custodian will inform you of the requirement to take a minimum distribution (RMD) this year.
- IRS Form 1099-R – If you withdrew money or investments from your IRA in 2021, your IRA custodian will send you a copy of IRS Form 1099-R to report the value of the distribution and any federal or state tax withheld and remitted. This form is also filed with the IRS to report taxable income you received in 2021 and any tax withholding remitted on your behalf. Form 1099-R does not reflect activity that could reduce your tax liability for a distribution, such as completing a rollover or taking a distribution that includes nondeductible contributions (basis). You must notify the IRS on your tax return that you qualify for reduced tax liability as a result of any of these situations.
A valuation of your alternative investments as of December 31, 2021, must be provided to your IRA custodian each year. Depending on the type of investments in your IRA, the investment issuer may provide a valuation to STRATA for you, or you may need to arrange to have your investments valued by a qualified appraiser. STRATA will mail a request for fair market value to remind you.
Contribute the maximum amount to your IRA for 2021. You still have time to contribute and take a deduction on your tax return for 2021. You can contribute up to $6,000 (or 100% of your income if less) to your Traditional and Roth IRAs—or $7,000 if you’re age 50 or older—until April 18, 2022, as a contribution for 2021. Be sure to include instructions with your deposit if you want your IRA custodian to treat the contribution for 2021, or they will treat it as a 2022 contribution.
Take your 2021 RMD by April 1 if you turned 72 in 2021 and waited until 2022 to take your first RMD.
File your 2021 individual income tax return by April 18, 2022 (assuming the IRS does not extend the deadline this year because of a pandemic-related or natural disaster). April 15 is the usual deadline, but it falls on a holiday in 2022, so Tax Day is the next business day, April 18. Maine and Massachusetts residents have until April 19 because of the Patriot’s Day holiday in those states. All individual filers may apply for an extension to file by October 17.
Submit your fair market value evaluations to STRATA by May 15 for your IRA alternative investments.
Watch for your copy of IRS Form 5498, IRA Contribution Information, from your IRA custodian by May 31. This form reports all contributions made to your IRA for 2021, including annual contributions, rollovers, conversions, and recharacterizations. Form 5498 must also include the fair market value of your entire IRA and, separately, report the value of certain hard-to-value investments in your IRA. This information is filed with the IRS, so it’s important to provide accurate valuations to your IRA custodian and make sure your tax returns contain information that matches what is reported on Form 5498.
June – July – August
Conduct a mid-year review of your IRA investments this summer while there are no tax or IRS requirements to perform. Half-way into 2022 – are your investments performing as you expected? Do you need to adjust your objectives to reduce risk or to address the current economic situation? A self-directed IRA provides you the freedom to invest your IRA in a wide array of alternative investments, such as real estate and precious metals, that offer diversification from the more traditional investments tied to the stock market. You may want to visit with your financial advisor this summer to explore a wider range of investment alternatives.
Revisit your beneficiary designation for your IRAs. Have you married, divorced, or had a child this year? Have you opened a new IRA or transferred assets between IRAs? Any of these types of actions may trigger a need to change your IRA beneficiaries. If not, at least confirm that your beneficiaries’ addresses, telephone numbers, and email information are correct, so that legal rights to your IRA assets will be transferred smoothly to the beneficiary of your choice upon your death—outside of probate.
If you filed your 2021 taxes timely, October 17 is the deadline to correct an excess contribution for 2021 and to recharacterize a 2021 contribution from a Traditional IRA to a Roth IRA or vice versa.
Schedule your 2022 RMD so it is processed by December 31. Keep in mind, if you are turning 72 in 2022, you may wait until April 1, 2023, to take your 2022 RMD. The amount you are required to take will be based on your December 31, 2021, IRA balance and the IRS’s updated life expectancy tables. If your IRA investments must be liquidated to payout the RMD, consider whether you want to take an in-kind distribution of your investment instead, or if you can satisfy your RMD from another IRA with more liquid assets. If you still have earned income, you may contribute to your IRA each year to increase the pool of liquid assets available for distributing RMDs (although this may increase the amount you are required to take each year).
If your taxable income for the year is less than you anticipated, or well below the next tax bracket, you may want to consider converting some of your Traditional, SEP, or SIMPLE IRA assets to a Roth IRA. As a taxable transaction, it could increase your tax liability for 2022. But Roth IRAs are not subject to the RMD requirements while you’re alive, and all Roth IRA distributions can be tax-free. If you’re interested in creating a tax-free income stream in retirement or for your heirs, talk to your financial or tax advisor about the benefits and considerations of converting pre-tax retirement assets to an after-tax Roth IRA.
Take your RMD, if you are 72 or older, before December 31. For STRATA account holders RMD requests are due December 1st, 2022, in order to meet the December 31st IRS deadline.
If you are a beneficiary of an IRA, you may need to elect a payment option or take a payment from an inherited IRA by December 31. If an IRA owner or beneficiary fails to take a required payment, they are subject to a 50% excess accumulation tax on the portion of the amount remaining in the IRA that should have been distributed.
December 31 is also the IRS deadline to complete a conversion to a Roth IRA if you want the additional income counted for the 2022 tax year.
Talk to your financial or tax advisor before the end of the year if any of these situations apply to you … and start planning for 2023!
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