SDIRA End of Year Checklist

Roth Conversions

Are you thinking of doing a Roth Conversion for the tax year 2023? If you have a tax-deferred retirement account like a Traditional IRA and would like to convert it to a Roth IRA, the deadline to convert it for this tax year is December 31, 2023. Please note the last business day of the year is December 29th. If you've been considering a Roth Conversion of an asset, you'll want to start this process soon to make sure you have all of the supporting documentation needed to complete the process by the end of the year. To learn more about Roth Conversion, you can watch this helpful video.

Solo 401k Establishment Deadlines

Since the creation of the Solo 401k in 2002, self-employed individuals and small business owners have been able to invest and work toward a secure retirement. If you're looking to establish a Solo 401k so you can make contributions for the 2023 tax year, you must open your account by December 31, 2023.

2023 Contributions

While we're on the subject of contributions, have you made your contributions for 2023 yet? Finish your year off right by making contributions to your IRA today. And here is some news to look forward to – annual contribution limits for 2024 are increasing! Read more about the 2023 and 2024 contribution limits for all accounts, including catch-up contributions.

Required Minimum Distribution (RMD) Deadline

Your required minimum distribution (RMD) is the minimum amount you must withdraw from your IRA each year. Generally, you must start taking withdrawals from your Traditional IRA, SEP IRA, SIMPLE IRA, and other types of tax-deferred retirement plans when you reach the required age (or after inheriting any IRA). As of Jan. 1, 2023, your first RMD must be taken no later than April 1st of the year following the calendar year in which you turn age 73. If you were already taking RMDs before Jan. 1, 2023, even if you turned 73 in 2023, you would continue to take RMDs as scheduled. Subsequent RMDs must be taken by December 31st of each year.The amount of the RMD is calculated annually, based on the previous year's fair market value as of December 31st and the age (and life expectancy) of the account holder. (If you inherited an IRA, it may be measured by your life expectancy.) You are always free to withdraw more than the required amount, but failure to satisfy your RMD may trigger tax penalties. Since Self-Directed IRAs contain alternative investments, you must remember to keep enough uninvested cash free in your IRA to be able to take a distribution. However, if you have more than one retirement account requiring an RMD, you can take the combined total RMD due and distribute it from any account.

Qualified Charitable Distributions (QCD)

Did you know charitable contributions can also satisfy your RMD? If you would like to make a qualified charitable distribution (QCD), you have until the end of the year. A QCD is an otherwise taxable distribution from an IRA owned by an individual who is age 70½ or older and is paid directly from the IRA to a qualified charity. If you would like to make a QCD, your distribution follows the same rules as other accounts and must be satisfied by December 31st. Here are some helpful QCD tips you should know:

• QCDs may satisfy all or part of a taxpayers RMD.
• QCDs can be done after 70.5, RMDs begin at 73.
• The charity must be a 501(c) (3) organization. Some charities that do not qualify are private foundations, donor-advised funds, or supporting organizations.

To learn more about QCDs, read our blog article Does a Qualified Charitable Distribution Make Sense for You?

Fair Market Valuations (FMV)

We are in Fair Market Valuation (FMV) season! An FMV is due for any open investment in your account no later than January 15, 2024, for the 2023 tax year. Submitting an FMV is essential to comply with the Internal Revenue Service reporting requirements. It allows us to properly report the value of non-cash assets in your account. This is an annual requirement and is based on the value of each investment as of December 31st of the reporting year. Please keep in mind that custodians, like Quest Trust Company, are required to obtain the most current FMV available for the investments in your account at least once a year. The easiest way to submit your FMV documentation is through the Client Portal.