The IRS requires an annual valuation of all retirement accounts. The FMV is the total dollar value of assets within the account at yearend. IRS Form 5498 is used for IRAs and a Form-5500 for Individual 401(k)s. At Rocket Dollar, you know your investment best.
As you know your investments best, the compilation of values will need to start on the client side. Each and every investment should have a value attached to it based on an investor statement, market analysis or partnership tax reporting form. These do not have to come from a third-party and can be generated directly by the investment firm or partner you're working with. Ultimately this should be a representation of the market price at which the asset would trade hands in an objective transaction.
Funds and private investments should receive an annual investor statement or tax reporting form such as a K1. If you have not received any written or electronic correspondence from the issuing company then we would encourage you to reach out obtain an updated report immediately.
Real estate investments can be updated with a report from the county tax appraisal, comparable market analysis or online valuation platform. If a tax reportable action is taking place, such as a Roth Conversion is it imperative that a licensed appraisal is generated for the property.
Notes and other debt instruments are typically reported at the remaining Principal balance. Depending on the legal agreement there may be additional factors to consider.
When and how does the tax reporting need to happen?
The value reported to the IRS is as of 12/31 for the tax year in question. Once gathered these values are reported by Rocket Dollar and our Custodian provider in January of the following year. It is imperative that these values are submitted in a timely fashion. Rocket Dollar’s valuation form can be found in the Investment Review section in your client dashboard.