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Time to Gear Up for First-Quarter Reporting Requirements

By Jodie Norquist, CIP, CHSP

If your financial organization administers IRAs, health savings accounts (HSAs), and Coverdell education savings accounts (ESAs), you are likely aware of the many reporting deadlines looming in the first quarter of the coming year. Performing these annual administrative tasks can be stressful. After all, compliance errors or missed deadlines can lead to costly financial penalties.

Here’s a rundown of the impending due dates, along with a brief description of the financial organization’s requirements. Please note that if any of these deadlines fall on a Saturday, Sunday, 
or legal holiday, the deadline is extended to the following business day.

January 31

Fair Market Value Statement

Financial organizations must provide an annual fair market value (FMV) statement to IRA owners and beneficiaries by January 31. These statements must be provided to Traditional, Roth, and SIMPLE IRA owners. They must also be provided to Traditional IRA owners that have received simplified employee pension (SEP) plan contributions. FMV statements are required for both IR accounts and IR annuities, including those that have been annuitized.

NOTE: FMV statements are not required but are recommended for HSAs.

The FMV statement must

  • show the IRA’s FMV as of December 31 of the previous year;
  • be presented in any type of written format;
  • be provided to IRA owners even if no contributions were made to the IRA for that year; and
  • contain a legend designating which information is being furnished to the IRS on Form 5498, IRA Contribution Information.

Required Minimum Distribution (RMD) Statement

If an IRA owner is age 72 or older and is required to take a distribution from an IRA for the year, the financial organization holding the IRA on December 31 of the prior year must provide an RMD statement to the IRA owner by January 31. RMD statements are not required for beneficiaries or for Roth IRA owners. This statement may be combined with the FMV statement.

The RMD statement must

  • inform the IRA owner that an RMD is due for the calendar year,
  • notify the IRA owner of the date by which the RMD must be taken,
  • include an offer to provide a calculation of the RMD amount, upon request, and
  • communicate what information is being reported to the IRS for the year.

This requirement may also be satisfied if a Form 5498 is sent to the IRA owner by January 31. If a financial organization opts to use Form 5498 to satisfy the RMD statement, then the date by which the RMD must be distributed should be entered in Box 12a, RMD date, and the RMD amount in Box 12b, RMD amount. However, keep in mind that if an IRA owner must take an RMD for the year, the financial organization is not required to report any RMD information to the IRS on Form 5498, other than the fact that an RMD is due.

SIMPLE IRA Account Statement

Financial organizations must provide SIMPLE IRA owners with an account statement by January 31. Although the IRS hasn’t provided any specific guidance on the form that the account statement must take, the SIMPLE IRA account statement must include

  • the SIMPLE IRA’s account balance as of the end of the previous calendar year;
  • a summary of the account activity throughout the previous calendar year; along with
  • any distributions taken or fees charged against the account, as well as all contributions.

Coverdell ESA Year-End Statement

While year-end statements for Coverdell ESAs are not required, they are recommended. Before 2003, the FMV of an ESA—originally known as an Education IRA—was reported on Form 5498, IRA Contribution Information, which suggests reporting ESA FMVs as a “best practice.” The recommended deadline for providing a year-end statement to the designated beneficiary is January 31. This statement should show

  • the ESA’s FMV as of December 31 of the previous year, and
  • contribution activity for the calendar year.

IRS Form 1099-R

Financial organizations must report Traditional, Roth, and SIMPLE IRA distributions made during the calendar year on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., to IRA owners and beneficiaries by January 31.

  • Distributions reported on Form 1099-R include
  • rollovers,
  • recharacterizations, and
  • conversions.

IRS Form 1099-SA

HSA and medical savings account (MSA) owners must be sent a Form 1099-SA, Distributions from HSA, Archer MSA, or Medicare Advantage MSA, by January 31, which reports their distributions for the previous year.

IRS Form 1099-Q

ESA distributions that were taken during the previous calendar year are reported on IRS Form 1099-Q, Payments From Qualified Education Programs, which is due to recipients by January 31.

IRS Form 945 and 945-A

Financial organizations must report amounts withheld by payers to the IRS on Form 945, Annual Return of Withheld Federal Income Tax. Form 945 is due to the IRS by January 31 of the year following the year the taxes are withheld.

NOTE: If withholding deposits are made on time and in full, the due date for filing Forms 945 and 945-A is February 10, rather than January 31.

Some payers are required to file Form 945-A, Annual Record of Federal Tax Liability, in addition to Form 945, depending upon the payer’s withholding depositor status. Monthly depositors file only Form 945, which lists the amount of nonpayroll withholding collected for each month. Semiweekly depositors, however, file Form 945-A with Form 945 to report nonpayroll withholding. Form 945-A reports the amount of nonpayroll withholding collected each day. The IRS uses Form 945-A to match the tax liability to deposits to determine whether the withholding tax liabilities have been timely deposited.

Employer SEP Contribution Notice

Employers that make SEP plan contributions for employees must notify employees of all discretionary contributions by the later of

  • January 31 of the year following the year for which the contribution is made, or
  • 30 days after the contribution is made (potentially as late as the SEP plan sponsor’s tax return due date, including extensions).

February 28

IRS Forms 1099-R, 1099-Q, and 1099-SA

Forms to report distributions are due to the IRS by February 28 if filing on paper. The paper form must be filed with a Form 1096, Annual Summary and Transmittal of U.S. Information Returns.

March 15

IRS Forms 1099-R, 1099-Q, and 1099-SA

Forms 1042 and 1042-Srm 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, is filed to report tax withheld by the payor on certain payments (including IRA distributions) to foreign persons, including nonresident aliens. Form 1042 must be filed with recipients’ Forms 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, by March 15 of the year following the year of distribution.

March 31

IRS Forms 1099-R, 1099-Q, and 1099-SA

These forms used to report distributions from IRAs, Coverdell ESAs, HSAs, and MSAs are due to the IRS by March 31 if filing electronically. Financial organizations must file electronically if there are 250 or more returns of any one type.