Every year, the IRS requires a report of the value of your IRA assets. This is not a requirement only for self-directed IRA accounts; rather, fair market valuations (FMVs) are required of all IRAs. However, the process of ascertaining the value of non-liquid investments differs from reporting the value of more traditional assets like stocks, bonds, and mutual funds.
This is where forms for fair market valuations come in. They are used to update or change the value of an asset in a self-directed IRA. A fair market value is an estimate of the market value of an asset. Therefore, a separate FMV form must be completed for each asset held in the account.
What the IRS requires:
The IRS requires Midland Trust to report the values of clients’ accounts as of December 31st of each year. Separate of the IRS’ requirement, this valuation is important because the value is used to determine Required Minimum Distribution (RMD) for clients over 72. Whether your account has an RMD or not, your IRA’s activity is still reported annually to the IRS. IRA custodians are required to report your account’s information on tax form 5498 each year in May.
Why are you sent FMV requests from your IRA investors?
Midland Trust sends fair market valuations requests to each individual account holder with instructions for obtaining the value of their assets. The value used for the FMV must be provided by a third party. In most cases this is the investment manager or sponsor.
How to make this easier on investors:
Not all clients will receive a request for updated fair market valuations. If the asset the client is invested in provides a frequent update, whether it be monthly, quarterly or annually, these satisfy the FMV requirement. To update the asset’s value, statements can be sent to: [email protected].
For assets that have multiple clients in one holding, the investment sponsor/manager may send a spreadsheet of client investment amounts and any known change in value, along with a current price date.
FAQs about fair market valuations:
- Will a K1 suffice for valuation?
Unfortunately, no. A K-1 is not an assessment of value because the K-1 provides the value of the asset as of the end of the previous tax year and is a ‘snapshot in time’ value.
- What does the sponsor need to submit for values?
The investment sponsor needs to submit a letter or spreadsheet of values (along with the value date). As long as the document includes the asset name, price/units, price date, and is sent by the asset manager, this will be sufficient to update Midland’s records.
- What if the value has not changed?
If the annual value has not changed, we still need substantiation for our records to reflect that the value has remained the same. As Custodian on the account, we are required to have this on file at least once per year for every asset that we custody.
- Our annual audit isn’t completed until after 12/31, can I submit the values then?
Yes. If your annual audit has not been completed by the time you receive our request, please call our office and let us know when we can expect the updated value. We understand that valuations take time, so we give clients and investment sponsors until the end of the first quarter to send these to us prior to assessing late valuation fees.
- Why can’t the investment entity fill this out?
The investment entity can fill in the Fair Market Valuation. However, the client will need to sign and date it in Section 4 confirming the information being submitted to Midland.
- Where do I submit the FMV form?
You can send this paperwork to
By fax: (239) 466-5496
By email: [email protected]
By mail: P.O. Box 07520 Fort Myers, FL 33919
You can update your fair market valuations on our Midland 360 portal.