2014 Basic Tax Reporting / 2015 IRA Changes. Connect with the Experts

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Ascensus® and the Ascensus logo are registered trademarks of Ascensus, Inc. IRAdirect® is a registered trademark of Ascensus, Inc. This manual is designed for use in conjunction with seminars conducted by

Ascensus. Some areas are not intended to be covered fully, but only highlighted for presentation purposes. It is understood that the publisher is not engaged in rendering legal or accounting services. Every effort has been made to ensure the accuracy of the material presented during the seminar. But retirement plan forms, government regulatory positions and laws are subject to change, so we cannot guarantee the accuracy of the material. The material in this manual reflects the law and regulatory interpretations as of the publication date of October 2014 (v3). Much of the information contained in this manual is based on the operation of the financial organizations to which we provide services. Some of your procedures may vary if your organization is not a member organization served by us. Ascensus makes no representations regarding compliance of the seminar or guidebook with any state laws or state regulations or federal securities law.

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2014 Basic Tax Reporting / 2015 IRA Changes

Learning Objective(s)

After participating in this webinar, you will be able to

identify the IRA tax forms required for contributions and distributions; explain the IRA tax form due dates to the account owner and IRS;

analyze current tax year processes to assure accurate reporting and compliance; and highlight changes that will effect IRAs in 2015.

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IRA Tax Reporting Timeline

Distribution Occurred

Deadline to report IRA distributions and FMV/RMD to IRA account owners

Deadline to electronically report IRA distributions to the IRS Deadline to make regular IRA contributions Deadline to report IRA contributions to account owners and IRS Regular Contribution

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Reporting IRA Distributions

How is IRA distribution information reported?

Traditional and Roth IRAs

Financial organizations use IRS Form 1099-R, Distributions From Pensions, Annuities,

Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., to report IRA distributions to the account owner and to the IRS.

1. If distributions occur, Form 1099-R is sent to the account owner by January 31 of the following year and to the IRS by March 31, if filing electronically.

2. This form includes the gross distribution, distribution reason code, and any amounts withheld for federal and state income taxes.

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Reporting IRA Distributions

2014 IRS Form 1099-R

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Reporting IRA Distributions

Traditional IRA Distribution Type IRS Reason Code

Early distribution (account owner under age 59½) 1 Conversion, federal tax levy, substantially equal periodic

payments (account owner under age 59½) 2

Disability (account owner under age 59½) 3

Death (beneficiary distribution) 4

Normal (account owner age 59½ or over) 7

Roth IRA Distribution Type IRS Reason Code

Early distribution (account owner under age 59½) J

Federal tax levy (All account owners) 2

Substantially equal periodic payments T or J Disability (account owner under age 59½) T or Q

Death (beneficiary distribution) T or Q

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Reporting RMDs

Reporting the RMD to the Account Owner

The financial organization must notify each Traditional IRA account owner age 70½ or older of the estimated RMD and the deadline for taking that RMD. An RMD statement must be sent by January 31 of each year to each IRA owner who will have an RMD due in the current year. The RMD statement must include the following information.

1. Notification that an RMD is required.

2. The date by which the RMD must be distributed.

3. Either the amount of the estimated RMD, or an offer to calculate the RMD upon request.

NOTE: If Ascensus is printing the statement on behalf of the financial organization, the

amount of estimated RMD will be included.

4. The language “This information is being furnished to the IRS.”

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Reporting RMDs

Reporting the RMD to the IRS

Financial organizations must identify to the IRS on Form 5498, IRA Contribution Information, each IRA for which an RMD is required. Financial organizations do not have to report the RMD amount. The reporting is done on the form for the preceding year. For example, financial organization report 2014 RMDs in Box 11 on the 2013 Form 5498.

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Reporting IRA Contributions

Traditional and Roth IRAs

IRA contributions are reported on Form 5498.  Form 5498 is sent to the IRS by May 31.

 Form 5498 includes the total regular, rollover, SEP, conversion, and recharacterized contributions. The form does not include transfer contributions.

 Form 5498 also includes the fair market value (FMV), which is the IRA’s balance as of December 31 of the prior year.

 Contributions are reported to the IRA owner annually on an account statement (or an acceptable substitute, such as Form 5498). If the account owner made contributions during the year, Form 5498 (or an account statement) is sent to the account owner by May 31. If the account owner did not make contributions, Form 5498 will only be sent to the IRS and not the owner.

 If May 31 falls on a Saturday, Sunday, or legal holiday, the due date is the next business day (for tax year 2013, the deadline is June 2, 2014).

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Reporting IRA Contributions

2014 IRS Form 5498

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Reporting Review

Traditional and Roth IRAs

1. IRA distributions are reported on IRS Form 1099-R.

 For a reportable distribution, Form 1099-R is sent to the account owner by January 31 of the following year and to the IRS by March 31.

2. Financial organizations must report the account balance as of the close of business on December 31 to IRA account owners by January 31 and to the IRS by May 31. This balance is known as the fair market value (FMV).

 The IRS does not require a formal document for reporting the FMV. The financial

organization can use IRS Form 5498, the year-end financial organization statement, or it can create a separate FMV form.

3. Financial organizations must provide the required minimum distribution (RMD) amount due for the year or it must offer to calculate the RMD amount for each Traditional IRA account owner attaining age 70½ or older. The financial organization also must disclose the date by which the RMD for the year is due. The due date for this form is also January 31.

4. IRA contributions are reported to the account owner on an account statement (or an

acceptable substitute form, such as IRS Form 5498). The financial organization must report IRA contributions to the IRS on Form 5498.

 Form 5498 (or an account statement) is sent to account owner by May 31 of the following year only if there is a reportable contribution for the year.

 Form 5498 is sent to the IRS by May 31 of the following year if there is an account balance at the end of the year.

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2015 IRAs: What You Need to Know!

One-Per-12-Month Rule

IRS Announcement 2014-15

An IRA owner is allowed one IRA-to-IRA rollover per 12-month period (IRC Sec. 408(d)(3)(B). The IRS announced in March 2014 that it is changing its interpretation of this requirement to follow a recent U.S. tax court ruling in Bobrow v. Commissioner. The IRS position for many years, as stated in proposed Treasury regulation 1.408-4(b)(4)(ii) and in IRS Publication 590,

Individual Retirement Arrangements (IRAs), had been that a taxpayer is permitted to roll over one IRA distribution per 12-month period for every IRA that he owns. The tax court ruled in

Bobrow v. Commissioner that a taxpayer is limited to only one IRA rollover per 12-month period, regardless of the number of IRAs he may have.

The IRS released Announcement 2014-15 on March 24, 2014, stating that it will apply the tax court’s interpretation going forward, but that it will not apply this new interpretation before January 1, 2015. The IRS has withdrawn the proposed regulations, and it intends to revise Publication 590 and to issue new proposed regulations that will provide that the IRA rollover limitation applies on an aggregate basis (per IRA owner).

For 2014, therefore, IRA owners may roll over one distribution per IRA that they own during any 12-month period. The IRA assets that are rolled over may not be rolled over more than once during the 12-month period. The 12-month period begins on the day the IRA owner receives the distribution.

When the IRS’ applies its new interpretation (presumably January 1, 2015), an IRA owner may complete only one IRA rollover in any 12-month period, regardless of how many IRAs she owns. In March 2014, the IRS released an article at its website that stated this rule would be applied separately for Traditional and Roth IRAs. This detail, however, was later removed from the article, and Ascensus contacted the IRS with questions. Based on follow-up communications, it now appears that the IRS has reconsidered that position, and believes that aggregating

Traditional, Roth and SIMPLE IRAs into a combined one-rollover limitation better reflects Congress’ intended safeguards against abusive use of IRA assets as de facto lending instruments. As of this writing, the IRS had not yet released new proposed regulations. Note that the one-per-12-month rule does not apply to IRA transfers. It also does not apply to retirement plan rollovers to IRAs, nor to certain rollovers related to failed attempts to purchase a first-time home (IRC Sec. 72(t)(8)(E)).

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2015 IRAs: What You Need to Know!

QCDs

A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. An IRA owner can exclude from gross income up to $100,000 of a QCD made for a year, and a QCD can be used to satisfy any IRA required minimum distributions (RMDs) for the year. Also, the amount of a QCD excluded from gross income is not taken into account in determining any deduction for charitable contributions.

QCDs were created by the Pension Protection Act of 2006. When they first originated, they were effective from August 17, 2006 through the end of 2007. Congress then extended them through 2009 and then again through 2011. Last year, the American Taxpayer Relief Act of 2012 (ATRA), reinstated QCDs once again provided retroactive treatment for QCDs for 2012 and to extend them through 2013.

The last day for making a QCD was December 31, 2013, for calendar-year taxpayers. Many IRA owners have asked if QCDs will be allowed for tax year 2014 or 2015. On July 17, 2014, the U.S. House of Representatives passed a charitable giving bill containing provisions that would make QCDs permanent. The bill also would extend the deadline for taking QCDs to April 15 of the year following the tax year for which the donation was intended. This is a change from the December 31 deadline previously required. At the time of this writing, identical

legislation had not been passed by the Senate in order for this QCD legislation to be enacted.

IRS Publication 590

After 2013, Publication 590 will be split into two separate publications: Publication 590-A and Publication 590-B.

Publication 590-A

Publication 590-A, will focus on contributions to traditional IRAs as well as Roth IRAs. This publication will include the rules for rollover and conversion contributions.

Publication 590-B

Publication 590-B, will focus on distributions from traditional IRAs as well as Roth IRAs. This publication will include the rules for required minimum distributions and IRA beneficiaries.

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2015 IRAs: What You Need to Know!

End of Social Security Administration Letter-forwarding Program

In April of 2014, the Social Security Administration (SSA) announced that its letter-forwarding program was ending. This program had been available to IRA custodians, trustees, and issuers, as well as to retirement plan sponsors, administrators, and the general public. The

letter-forwarding program has been used to locate missing retirement plan participants and

beneficiaries when service providers or administrators lack current address information and are unable to locate missing individuals by conventional means. The SSA cited several alternative missing person locator services, including the Internet, as its rationale for discontinuing the option. The agency also stated that its decision is in line with the discontinuance of the IRS letter-forwarding program in 2012. The SSA letter-forwarding option ended in May of this year.

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2015 IRAs: What You Need to Know!

2015 COLAs

MAGI Limits for Roth IRA Contributions

2015 MAGI Limits for Roth IRA Contributions*

Filing Status

MAGI for

Full contribution

MAGI for Partial

Contribution

Ineligible for Roth

Contribution

Single

Up to $116,000

$116,000 up to $131,000

Over $131,000

Married, filing

jointly

Up to $183,000

$183,000 up to $193,000

Over $193,000

Married, filing

separately**

N/A

$0 up to $10,000

Over $10,000

Regular Contribution Limit

Year Maximum individual amount

(regular/spousal contribution)

Maximum catch‐up contribution amount

2014

$5,500

$1,000

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Job Aids

Traditional IRA Distribution Type IRS Reason Code

Early distribution (account owner under age 59½) 1 Conversion, federal tax levy, substantially equal periodic

payments (account owner under age 59½) 2

Disability (account owner under age 59½) 3

Death (beneficiary distribution) 4

Normal (account owner age 59½ or over) 7

Roth IRA Distribution Type IRS Reason Code

Early distribution (account owner under age 59½) J

Federal tax levy (all account owners) 2

Disability (account owner under age 59½) T or Q

Death (beneficiary distribution) T or Q

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2014 Basic Tax Reporting / 2015 IRA Changes. Connect with the Experts

2014 Basic Tax Reporting / 2015 IRA Changes

Table of Contents

Learning Objective(s)

After participating in this webinar, you will be able to

IRA Tax Reporting Timeline

IRA Tax Reporting Timeline

Reporting IRA Distributions

How is IRA distribution information reported?

Traditional and Roth IRAs

Reporting IRA Distributions

2014 IRS Form 1099-R

Reporting IRA Distributions

Reporting RMDs

Reporting the RMD to the Account Owner

Reporting RMDs

Reporting the RMD to the IRS

Reporting IRA Contributions

Traditional and Roth IRAs

Reporting IRA Contributions

2014 IRS Form 5498

Reporting Review

Traditional and Roth IRAs

2015 IRAs: What You Need to Know!

One-Per-12-Month Rule

IRS Announcement 2014-15

2015 IRAs: What You Need to Know!

QCDs

IRS Publication 590

Publication 590-A

Publication 590-B

2015 IRAs: What You Need to Know!

End of Social Security Administration Letter-forwarding Program

2015 IRAs: What You Need to Know!

2015 COLAs

MAGI Limits for Roth IRA Contributions

2015 MAGI Limits for Roth IRA Contributions*

Filing Status

MAGI for

Full contribution

MAGI for Partial

Contribution

Ineligible for Roth

Contribution

Single

Up to $116,000

$116,000 up to $131,000

Over $131,000

Married, filing

jointly

Up to $183,000

$183,000 up to $193,000

Over $193,000

Married, filing

separately**

N/A

$0 up to $10,000

Over $10,000

Regular Contribution Limit

2014

$5,500

$1,000

Job Aids