IMPORTANT NEWS AND INFORMATION REGARDING YOUR SELF‐DIRECTED IRA
IRA
FOCUS
January 2016 IN THIS ISSUE
Top Tips for Making Your 2015-2016 IRA Contribution
Top Tips for Making Your 2015-2016 IRA Contribution
Important 2016 Deadlines for IRAs
What To Do When An IRA-Owned Asset Generates Unrelated Business Taxable Income or Unrelated Debt-Financed Income
PATH Act of 2015 Makes IRA Qualified Charitable Distribution Permanent and More
IRA Custodial Account Agreement Amendment Notice
Annual Privacy Policy Disclosure
Important Information and Time-Saving Tips1. Make your contribution check payable to:
Self Directed IRA Services, Inc.
2. Write your account number on your check. 3. Complete and include a Deposit Coupon
to specify the year of the contribution. This form is available on our website, www.SDIRAServices.com under “Forms”. 4. Mail directly to Self Directed IRA Services,
Inc. (not to your adviser or an IRA-held investment!):
PO Box 23149 Waco, TX 76702-3149
Important:
Your envelope must be postmarked by the US Postal Service to Self Directed IRA Services, Inc. and the USPS post-mark must be no later than April 18,
2016 if contributing for the 2015 tax year.
Do not send your IRA contribution to your adviser or an IRA-held investment. Contributions cannot be accepted by these parties.
Do not use a third-party bill payment service for making your IRA contribution. These services often do not meet the required USPS postmark requirements outlined in IRS guidance 3.10.72.6.2.2 for “Postmark Date” and “Received Date” and can take several days to process your payment.
Follow these easy steps when making an IRA contribuƟon: If you’re considering
making an IRA contribution for 2015 or 2016, here are some important tips from the IRS about saving for retirement using an IRA.
1. You must be under age 70½ at the end of the tax year in order to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.
2. You must have taxable
compensation to contribute to an IRA. This
includes income from wages and salaries and net self-employment
income. It also includes tips, commissions, bonuses and alimony. If you’re married and file a joint return, generally only one spouse needs to have compensation.
3. You can contribute to an IRA at any time during the year. To count for 2015, you must make all contributions by the due date of your tax return, which does not include extensions. That means you usually must contribute by April 18, 2016. If you contribute between January 1 and April 18, make sure that you instruct your IRA
custodian which year to apply the contribution. 4. In general, the most you can contribute to your IRA for 2015 is the smaller of either your taxable compensation for the year or $5,500. If you are age 50 or older at the end of 2015, the maximum you can contribute increases to $6,500.
Important 2016 Deadlines for IRAs
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FEBRUARY 1 • We will mail your Form 1099-R if you received an IRA distribution or completed a Roth conversion in 2015.
APRIL 1 • If you are a Traditional IRA account owner and turned 70½ last year, but you elected to defer taking your first required minimum distribution (RMD), you must take your first RMD payment by April 1. (You are also required to take the current year RMD by 12/31.)
• Send your completed 2015 Form 990-T and instruction to pay any UBTI/UDFI tax payment due to us (prior to the 4/18 filing deadline).
APRIL 18 • Establish an IRA for your 2015 contribution (if not already opened). • Postmark your 2015 IRA contribution to SDIRA Services.
• Deadline for filing your 2015 Form 990-T and remitting your UBTI/UDFI tax payment to the IRS (must have your prior instruction).
• Remove prior year excess IRA contributions – extensions allowed. • Recharacterize prior year IRA contributions – extensions allowed.
MAY 31 • We will mail your Form 5498 if you made IRA contributions for 2015.
OCTOBER 15 • Remove excess IRA contributions for the prior year. • Recharacterize IRA contributions for the prior year.
DECEMBER 31 • Take your entire current year RMD amount to avoid a 50% penalty (Traditional IRA account owners that turn 70½ during 2016 have until April 1, 2017 to take their first RMD payment).
• Convert a Traditional IRA to a Roth IRA.
What To Do When An IRA-Owned Asset Generates
Unrelated Business Taxable Income or Unrelated
Debt-Financed Income
If you own an asset in your individual retirement account (IRA) which generates Unrelated Business Taxable Income (UBTI), including Unrelated Debt-Financed Income (UDFI), your IRA account may be subject to taxation. Assets which tend to generate UBTI include limited partnerships (LPs), limited liability companies (LLCs), real estate investment trusts (REITs) and debt-financed real estate. At the end of each year, the investment entity must report each investor’s pertinent financial information on a Schedule K-1 (IRS Form 1065).
The investment entity should prepare and mail this directly to you. However, if a K-1 is received by Self Directed IRA Services, Inc. (“SDIRA Services”), we will forward this form to you.
Generally, if gross UBTI or UDFI of $1,000 or more is generated during the 2015 tax year, IRS Form 990-T must be prepared and filed with the IRS on or before the April 18, 2016 filing deadline. In addition, all applicable UBTI or UDFI tax must be paid from your IRA account with SDIRA Services. If the amount of gross UBTI/UDFI is less than $1,000, Form 990-T is not required to be filed.
Any income or loss shown on the K-1 for an asset held within your IRA should not be included and/or reported on your personal tax return. In addition, it is very important that the K-1 properly reflect SDIRA Service’s tax identification number (TIN) rather than your social security number. SDIRA Service’s TIN is 26-2637994. Please promptly notify us if the K-1 does not reflect this tax identification number.
The account owner is responsible for determining if the filing of IRS Form 990-T is necessary. If required, you must first obtain an employer identification number (EIN) for your IRA by filing IRS Form SS-4. Once you obtain the EIN, you should then complete IRS Form 990-T and send it to SDIRA Services for our signature. Consult with your tax professional for assistance in obtaining the EIN and completion of the Form 990-T.
Lastly, send your written instructions to authorize SDIRA Services pay the appropriate tax from your IRA account, along with your completed Form 990-T. A $50 fee will be charged by SDIRA Services for processing and filing the Form 990-T and payment.
Overview
In year-end legislation, the Consolidated Appropriations Act, which includes the “Protecting
Americans from Tax Hikes (PATH) Act of 2015”, was passed which included several tax relief provisions that impact IRAs and Coverdell Education Savings Accounts (CESAs). These provisions are outlined below, along with some potential consequences.
Qualified Charitable Distributions Reinstated and Made Permanent IRA owners that made qualified charitable distributions (QCDs) earlier this year in anticipation that QCDs made on or after January 1, 2015 would be recognized for federal income tax purposes can breathe a sigh of relief. The QCD provision was permanently extended to IRA owners and beneficiaries who have attained age 70½.
A QCD permits annual direct transfers to a qualified charity totaling up to $100,000 of tax-deferred IRA savings. Funds that have been distributed from the IRA to the IRA owner and are then contributed to charity can’t so qualify. QCDs offer advantages over taking a taxable IRA distribution and then contributing the proceeds of that distribution to a charity. That’s because taxable IRA distributions must be included in adjusted gross income. As a result: Income taxes on Social Security
benefits can increase,
Adjusted gross income (AGI) limitations on annual charitable deductions can defeat current deduction of the charitable contribution of IRA distribution proceeds (carryovers to a limited number of future tax years is available),
AGI limitations trimming
itemized deductions can apply, and
Medicare insurance premiums can increase.
QCDs can avoid these results.
Importantly, QCDs automatically satisfy required minimum distributions (RMDs) for the year when the QCD is made. That’s a real advantage for a charitably minded IRA owner who doesn’t need RMDs to live on.
Traditional IRA and Employer Plan-to-SIMPLE IRA Rollovers
Another provision in the legislation allows an individual to roll over amounts from a traditional IRA or an employer-sponsored retirement plan [e.g., 401(k) plan] to a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA, provided the individual has met an initial participation period of two years in his/her employer’s SIMPLE IRA plan. While fairly straight forward the plan administrator may not know whether an individual has met a two-year participation period other than by the individual’s certification. Due to this, financial organizations may unknowingly receive ineligible rollovers to SIMPLE IRAs. The IRS is expected to release guidance on the correction procedure for ineligible traditional IRA-to-SIMPLE IRA or employer plan-to-SIMPLE IRA rollovers. This provision applies to rollover contributions made after December 18, 2015.
American Airlines Employer Retirement Plan-to-IRA Rollover Another lesser known provision included in the legislation is an extension being provided to certain American Airlines employees to complete a rollover of retirement
plan payment amounts received due to the airline’s bankruptcy. Recipients of payment amounts may roll over such amounts to an IRA (traditional and/or Roth) within 180 days after December 18, 2015 (June 15, 2016).
CESA Eligible Expenses
Finally, a provision applicable to what expenses are deemed as qualified higher education expenses under Coverdell Education Savings Accounts has been permanently amended to include the purchase of computer or peripheral equipment [as defined in section 168(i)(2)(B)], computer software [as defined in section 197(e)(3)(B)], or internet access and related services, if such equipment, software, or services are to be used primarily by the designated beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution.
Conclusion
In the world of IRAs, the permanent extension of the QCD provision garnered most of the national attention. However as outlined above, there are other changes that will have an impact on owners of IRAs and CESAs.
PATH Act of 2015 Makes IRA Qualified Charitable
Distribution Permanent and More
Effective March 1, 2016, our IRA Custodial Account Agreements for Traditional, Roth, and SIMPLE IRAs will be amended.
To review your new account agreement, please log onto your
account at www.SDIRAServices.com and view them under the Reporting/ Documents tab.
If you would like to receive a paper version of the revised agreement, you may request that one be mailed to you
at no charge. Simply contact our Client Services team at (866) 928-9394 or send an email to: [email protected] to request a copy.
Notice of Amendment to SDIRA’s IRA Custodial Account Agreements
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Do you have IRAs with other companies?
Let us make it easy and convenient for you. Simply complete and sign our IRA
Transfer Request form available on our website at www.SDIRAServices.com,
mail the completed form to us – and let us take care of the rest!
Now is a great time to consider
consolidating your other IRA and
retirement accounts. Plus, the
move can save you time and
even fees!
Annual Privacy Policy Disclosure
Federal law requires us to tell you how we collect, share, and protect your personal
information. Our privacy policy has not changed and you may review our policy and practices with respect to your personal information at:
https://quikforms.com/viewform/zpWO-R4NpwIW6
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Important Information and Time-Saving Tips
Have IRA-held investments that generate UBTI or UDFI?Generally, if gross Unrelated Business Taxable Income (UBTI) or Unrelated Debt Financed Income (UDFI) of $1,000 or more is generated during the 2015 tax year, IRS Form 990-T must be prepared and filed with the IRS on or before the April 18, 2016 filing deadline. Contact our Client Services group for the steps you must take for filing Form 990-T.
Holding directly-owned real estate in your account? Make sure to forward your property tax statement and your authorization for us to pay from your account.
Wish you could trade publicly-registered stocks and mutual funds within your IRA? You now have the ability to open a brokerage account within your self-directed IRA so that you can place trades online through TD Ameritrade. Simply contact our Client Services team for the details on how to get started.
Still receiving paper statements? You can avoid the $30 paper statement fee and still receive one paper statement each year by electing to receive online statements. With e-statements, you will receive notification by email when your statement is ready to view.
Have an address change? A Change of Address form is available on our Forms menu at
www.SDIRAServices.com.
Access forms from our online Forms menu
You can access all forms necessary to initiate a transaction, distribution or other need directly on our website by vising the Forms section at www.SDIRAServices.com.
Take advantage of our online Account Access feature
ACCESS YOUR ACCOUNT online and view your account 24/7. This is a free, secured website service that
lets you check your available cash or view transaction details. You can even download your quarterly account statements, tax forms, and other important notices and communications.
If you are a first-time user, simply complete the self enrollment process to request access. For assistance with
the Account Access feature, you may email Client Services at [email protected] or call 866.928.9394
during normal business hours (Monday-Friday, 8 am—5:30 pm Central Time).
Sending funds to your IRA? Use a Deposit Coupon
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SERVICE & SUPPORT
866.928.9394 512.637.5739 [email protected]
Call or email our Client Service team for help with your account or transaction questions.
The information contained in this newsletter is not intended to provide specific advice or recommendations for any individual. We suggest that you consult with your financial, tax, or legal advisor with regard to your personal situation.
Investment Products: Not FDIC-Insured • No Bank Guarantee • May Lose Value ©2016 Self Directed IRA Services, Inc. All rights reserved.
PO Box 23149
Waco, TX 76702-3149 866.928.9394 • 512.637.5739 www.SDIRAServices.com
DOWNLOAD SERVICE FORMS
www.SDIRAServices.com
Visit the Forms section of our website to access all account service and investment direction forms.
ONLINE ACCOUNT ACCESS
www.SDIRAServices.com
Use the Account Access feature on our website to self enroll so you can view your account balances, transaction history and access your account statements, tax forms, or other communications and notices.
