Required Minimum Distribution; Self-Managed IRA/LLC

[grandyfamilyva]

I am trying to report my RMD for 2019 from my self-managed IRA (I have an LLC EIN).  I can't figure out how to report it under 1099-R.   I want to discuss this with a tax expert but can't figure out how to post the question to one of the experts.  Can you help, please?  

[macuser_22]

There is  no difference for a RMD other then being age 70 1/2 or older.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

[grandyfamilyva]

Thank you.  So far I'm with you.  However, I hold my own IRA (it's a self-managed precious metals IRA through a registered LLC).  I have an assigned tax ID, so I wouldn't send myself a 1099-R.  I need the distribution code to use; it's a standard (not roth) IRA.  

[grandyfamilyva]

Also, I'm 73 years of age.  The RMD has confused me up to now, but I'm trying to work it out to avoid penalty.  Thanks.

[macuser_22]

The trustee of the account must still be a registered financial institution that issues the 1099-R.

[grandyfamilyva]

I hope this is getting to you; this site is a bit confusing.

I have a personally-managed precious metals registered LLC and a federal EIN.  I'm 73, and took my first RMD in 2017, although I had to amend my tax return because I did not yet quite get RMD ramifications.  I am trying to report my RMD for 2019, but can't figure out which distribution code to use.  None of them seem to fit this category of distribution, since it's not a ROTH.  As an interim solution I used code 7 "Normal Distribution".  Will this suffice?  Thanks in advance.

Mike Grandy

[grandyfamilyva]

So if I understand what you're saying, even though I am the registered owner of the LLC and IRA, with an IRS-issued EIN, the organization that set it up for me (Fortress Gold Group) must STILL provide the 1099-R?  They haven't before; they just sent a memo with their computed RMD amount for me to report.

[macuser_22]

@dmertz  Could you weigh in here?

[macuser_22]

I have asked our resident expert ( @dmertz  ) for an opinion, but AFAIK, an IRA (where the "A" means "Account",  must have a trustee that is a bank of other registered financial institution that has IRS reporting requirements such as issuing 5498 forms and 1099-R forms to report account activity to the IRS.

You can have many different  investment types within the IRA, including self directed investments.   I am not familiar with LLC IRA's though.

[dmertz]

The trustee of an IRA must be a bank or an IRS-approved non-bank entity:

https://www.irs.gov/retirement-plans/approved-nonbank-trustees-and-custodians

https://www.law.cornell.edu/cfr/text/26/1.408-2#d

CFR 1.408-7 requires the trustee of the IRA to issue Forms 1099-R reporting distributions and Forms 5498 reporting contributions as well as providing the participant with the year-end Fair Market Value and whether or not an RMD is required (reported to the participant on either Form 5498 or on a separate statement if there were no contributions during the year):

https://www.law.cornell.edu/cfr/text/26/1.408-7

I don't see Fortress Gold Group on the list of approved trustees, so hopefully they are using the services of a bank or an approved trustee that is the entity required to provide you and the IRS with the Form 1099-R for any distribution.  Either that or they required you to arrange for a trustee and failing that, you would not legally have an IRA.  It's not clear, though, how they could be providing you with an RMD amount if they weren't the trustee.  By law, an IRA is a trust.  The self-directed IRA is the trust that owns your LLC, so it seems that you should know the entity involved in making the IRA an owner of your LLC.

Are you actually getting distributions from this investment?  Because IRA RMDs can be satisfied by a distribution from an different IRA, perhaps no distributions from the IRA in question have been made.  Have you requested the sale of any of the investment and receive the cash as a distribution?  Have you requested that any of the investment be distributed in-kind to a non-IRA account?  If you have done neither of these things, I suspect that you have not actually received any RMDs and may have excess accumulations subject to 50% penalties unless the RMD shortfall is corrected.  Without actually having received RMDs there would have been no income from this IRA that would be reportable on your tax returns.  Distributions must be requested either as a one-time distribution or on a prearranged schedule.  An IRA custodian cannot on their own initiate a distribution since they have no way of knowing whether or not you satisfied the RMD for this IRA with a distribution from a different IRA.