New 5498 Reporting: What does it mean for my IRA's private loans?

IRA holders are facing a new change in asset reporting for the 2015 tax year. IRS form 5498, which IRA providers use to report the value of your account, includes new Boxes 15a and 15b, which require IRA administrators to categorize the values of the assets within their clients’ IRA accounts. This includes a category that delineates the value of private loans extended with IRA account funds (15b).

Prior to the 2014 tax year, Box 15 didn’t exist, and IRA account holders only had to report the overall value of their IRA or qualified retirement plan. Box 15 appeared on IRS form 5498 in 2014, but reporting within the box was optional. For the 2015 tax year, the IRS is actively taking steps to enforce requirements for hard-to-value IRA assets. This means the IRS will have a more differentiated system for identifying which IRA accounts possess hard-to-value assets; not to mention a heightened ability to target certain investment structures in which prohibited transactions can often occur, such as Checkbook Control IRAs/ Individual LLCs.

Code B of Box 15b. requires the reporting of “Short or long-term debt obligation that is not traded on an established securities market”. This is essentially asking for a valuation of all notes and private loans within your IRA. Every asset in your IRA has a generally accepted process for valuation; original, purchased, and secondary market notes included.. The value of a private loan is determined by more than just the amount of money lent – there are three factors which contribute to the valuing a private loan in an IRA: 1. Original loan amount, 2. Interest rate, and 3. Length of term.

Theoretically, the value of a note fluctuates everyday due to inflation and the risk associated with the loan’s repayment. A private loan’s value is also dependent on the lender’s risk tolerance, as defined within the loan’s agreed-upon interest rate and maturity date.

The creation of Box 15 may mean the chances of your IRA getting audited by the IRS could increase. IRA account holders will have to be more meticulous than ever in their IRA transaction proceedings. So what can you do to make sure you and your IRA account are ready for IRS scrutiny should they choose to audit your account?

It requires a joint effort between the IRA account holder and the IRA administrator to keep account proceedings within the bounds of IRS rules and regulations. IRA administrators that provide educational services to their clients make it easier for account holders to exercise due diligence when making investment decisions. Choose a credible IRA administrator with a reliable track record and an educational business model to confidently make knowledgeable decisions about your IRA account proceedings. To learn more about self-directed IRAs, feel free to visit New Direction IRA’s website at for educational videos, webinars, and more.

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