The IRS requires that all custodians obtain and report the fair market valuation (FMV), or good faith estimate, of an IRA annually and/or prior to a taxable event. This valuation is easy with certain investments—such as publicly traded securities or precious metals—because they are bought and sold frequently on well-established markets, while other investments may be harder to value. But this doesn’t change the reporting requirement. The accuracy of this information is important for several reasons:
- It establishes the tax liability for distributions to the IRA owner or beneficiaries.
- It is used to determine required minimum distributions.
- It determines the tax liability for conversions from a Traditional IRA to a Roth IRA.
For STRATA Trust Company accountholders, generally all annual FMVs are due by April 30 in order to meet the IRS deadline for filing Form 5498. For taxable events such as a distribution or Roth conversion, the valuation is due at the time of the transaction.