Is Your Organization on Track to Meet These IRA, HSA, and Coverdell ESA Deadlines?
By Jodie Norquist, CIP, CHSP
Financial organizations are responsible for meeting many important deadlines throughout the year. For organizations that administer IRAs, health savings accounts (HSAs), and Coverdell education savings accounts (ESAs), it may seem as if your team is constantly throwing darts at moving targets, hoping that you don’t miss a deadline. After all, if you miss a reporting deadline or if the IRS finds that your program is out of compliance, your organization may face costly financial penalties. For example, a financial organization that fails to timely provide a withholding notice to clients could receive a $100 penalty per failure, up to a maximum of $50,000 per year.
It's a brand-new year filled with fresh reporting deadlines, and perhaps a good time to take note on whether your financial organization is on track to meet these obligations—or to refresh your memory on when specific deadlines occur. First quarter is always a busy reporting season.
Are you worried that your organization won’t meet its reporting deadlines or other administrative obligations? If so, Ascensus has got you covered with our Fully-Administered and Self-Administered programs. Whether you need an updated compliance manual, refresher courses for your staff, consumer education materials for your clients, or our assistance in helping to administer your IRA, HSA, or ESA programs, we’ve got the tools and resources to help you avoid IRS penalties and build a stronger IRA program. For more information on how Ascensus can make 2024 less stressful for you and your team, contact us at Sales.Support@ascensus.com to learn more about our Fully-Administered and Self-Administered programs and other tools and resources that we have available.
Following is a brief description of the important deadlines that take place throughout the year.
January 31
Fair Market Value (FMV) Statement
Financial organizations must provide an annual fair market value (FMV) statement to IRA owners and beneficiaries by January 31.* The report must show the IRA's FMV as of December 31 of the previous year. Traditional, Roth, and SIMPLE IRAs, as well as IRAs that contain simplified employee pension (SEP) plan contributions are included in this requirement. The FMV statement is recommended for HSAs.
Required Minimum Distribution (RMD) Statement
If a distribution is required to be taken from an IRA that is not a Roth IRA for the year and the IRA owner is alive at the beginning of such year, the financial organization holding the IRA on December 31 of the prior year must provide an RMD statement to the IRA owner. The RMD statement is due by January 31* of the year for which the distribution is required. The organization also must include the estimated RMD amount in the statement or provide contact information on the statement indicating that the organization will provide the RMD amount upon request.
The RMD statement requirement does not apply to beneficiaries or their IRAs.
SIMPLE IRA Account Statement
By January 31 following the close of each calendar year, financial organizations must provide an account statement to each SIMPLE IRA owner who maintains a SIMPLE IRA with their organization. Although the IRS has not provided any specific guidance on the form that the account statement must take, it must include the individual’s account balance as of the close of that calendar year, along with a summary of the account activity during that calendar year. Account activity includes all distributions and fees taken from the SIMPLE IRA, and all contribution activity.
Year End Statement for ESA
Although not an IRS requirement, year-end statements are recommended for ESAs. If providing a year-end statement, financial organizations should show the contribution activity for the year and the ESA FMV as of December 31 of the year of the report. The recommended deadline for providing the year-end statement to the designated beneficiary is January 31.
IRS Form 1099-R
Financial organizations must report Traditional, Roth, and SIMPLE IRA distributions made during the calendar year on Form 1099‑R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. The only IRA distribution that is not reported on Form 1099-R is a transfer: financial organizations must generally report all other distributions—including distributions that result in rollovers, recharacterizations, and conversions. Form 1099-R is due to IRA owners and beneficiaries by January 31.*
IRS Form 1099-SA
Form 1099-SA, Distributions From HSA, Archer MSA, or Medicare Advantage MSA, is filed by financial organizations to report HSA and medical savings account (MSA) distributions. Form 1099-SA is due to HSA owners by January 31.*
IRS Form 1099-Q
ESA distributions that occurred during the calendar year are reported on IRS Form 1099-Q, Payments From Qualified Education Programs, which generally is due to recipients by January 31.*
IRS Form 945 and 945-A
Amounts withheld from IRA and certain other retirement account distributions must be reported to the IRS on Form 945, Annual Return of Withheld Federal Income Tax. Form 945 generally is due to the IRS by January 31* of the year following the year the taxes are withheld.
Some payers are required to file Form 945-A, Annual Record of Federal Tax Liability, in addition to Form 945, depending upon the payer’s withholding depositor status. Monthly depositors file only Form 945, which lists the amount of nonpayroll withholding collected for each month. Semiweekly depositors, however, file Form 945-A with Form 945 to report nonpayroll withholding. Form 945-A reports the amount of nonpayroll withholding collected each day. The IRS uses Form 945-A to match the tax liability to deposits to determine if the withholding tax liabilities have been timely deposited.
Employer SEP Contribution Notice
Employers that make SEP plan contributions for employees must notify employees of the contribution by the later of
January 31 of the year following the year for which the contribution is made, or
30 days after the contribution is made.
February 10
IRS Forms 945 and 945-A
If withholding deposits are made on time and in full, the due date for filing Forms 945 and 945-A is February 10* rather than January 31.
February 28
IRS Forms 1099-R, 1099-Q, and 1099-SA
Forms to report distributions are due to the IRS by February 28* if filing on paper. The paper form must be filed with a Form 1096, Annual Summary and Transmittal of U.S. Information Returns.
March 15
IRS Forms 1042 and 1042-S
IRS Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, is filed to report tax withheld on certain income (including IRA distributions) to foreign persons, including nonresident aliens. Form 1042 must be filed with Forms 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, by March 15 of the year following the year of distribution.
March 31
IRS Forms 1099-R, 1099-Q, and 1099-SA
Forms to report distributions are due to the IRS by March 31* if filing electronically. Financial organizations must file electronically if there are 10 or more information returns in aggregate. This new requirement takes effect under IRS final regulations, effective for filings after January 1, 2024, which includes 2023 tax year forms filed in 2024. Prior rules required electronic filing only if 250 or more information returns of one type were being filed.
April 1
Required Beginning Date
A Traditional or SIMPLE IRA owner’s first required minimum distribution (RMD) is due April 1 of the year following the year that she turns age 73. This is called the required beginning date (RBD).
April 15
Prior-Year Contribution Deadline
Regular IRA, HSA, and ESA contributions generally must be made by the account owner’s tax return due date, not including extensions. Most individuals have a calendar year tax year, so the due date for contributions generally is April 15. Contributions made between January 1 and April 15* for the preceding year (referred to as “prior-year contributions”) require the account owner to make a written, irrevocable election. The date is extended if the deadline falls on a weekend or on certain holidays.
Mistaken Distribution Deadline
HSA owners who are allowed to repay a mistaken distribution must do so no later than April 15 following the first year that they knew or should have known that the distribution was a mistake. A mistaken distribution for HSA purposes is any distribution that was a result of reasonable cause because of a mistake of fact. A common example is a medical expense that an HSA owner did not expect to be reimbursed but was.
April 30
IRS Form 5498-ESA
Financial organizations must report ESA contributions (including rollovers and trustee-to-trustee transfers) on IRS Form 5498-ESA, Coverdell ESA Contribution Information. Unlike reporting for IRAs, the IRS generally does not require FMV reporting on Form 5498-ESA. The form must be provided to the ESA designated beneficiary by April 30* of the year following the distribution.
May 31
Account Statement
Financial organizations administering Traditional and Roth IRAs generally must provide an account statement to IRA owners and IRA beneficiaries by May 31* each year to report the prior year’s contribution activity. For years in which there are no contributions, an account statement need not be provided, as long as the financial organization provides the IRA owner with an FMV statement and a statement indicating which information is being filed with the IRS. This is also required for HSAs.
IRS Form 5498
IRS Form 5498, IRA Contribution Information, is used to report Traditional IRA, SEP plan, SIMPLE IRA plan, and Roth IRA contributions to the IRS. An account's FMV also is reported on this form. Form 5498 must be filed with the IRS by May 31* following the year to which the report applies.
IRS Form 5498-SA
IRS Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, is used to report HSA contributions, rollover amounts, and the year-end FMV. The deadline for filing Form 5498-SA with the IRS generally is May 31* following the year for which the HSA contribution was made.
IRS Form 5498-ESA
The deadline for filing Form 5498-ESA, Coverdell ESA Contribution Information, with the IRS generally is May 31* following the year for which the ESA contribution was made.
Deadline to Remove ESA Excess Contributions
The deadline to timely correct excess contributions to an ESA is generally before the first day of the sixth month following the taxable year (i.e., no later than May 31). As with Traditional IRAs, if the ESA excess contribution and earnings allocable are removed before the applicable deadline, the designated beneficiary avoids the six percent excess contribution penalty tax.
September 30
Determination Date
A designated beneficiary is the oldest among those beneficiaries named before the IRA owner’s death who continues to have a balance as of September 30 of the year immediately following the year of the IRA owner’s death.
October 1
Deadline to Establish a New SIMPLE IRA Plan
An employer may establish a SIMPLE IRA plan to be effective on any date between January 1 and October 1, provided that the employer did not previously maintain another employer-sponsored plan under which benefits accrued for that year. A new employer that comes into existence between October 1 and December 31 of a year, however, may establish a SIMPLE IRA plan to be effective immediately if the plan is established as soon as administratively feasible.
October 15
SEP and SIMPLE Plan Contribution Deadline
The deadline for contributing employer contributions to a SEP or SIMPLE IRA is the employer’s tax return due date, including extensions.
Excess Contribution Removal Deadline
If an IRA or HSA owner timely files his federal income tax return by his tax return due date, which may include extensions, he has an extended deadline of six months (October 15 for most taxpayers) to remove the excess contributions with the net income attributable to the excess. If removed by the deadline, the IRA or HSA owner does not pay a six percent penalty tax on the excess.
Recharacterization Deadline
A recharacterization allows an IRA owner to “undo” certain transactions or to treat them as though they were made to a different type of IRA. The deadline to complete a recharacterization generally is the IRA owner’s tax return due date plus extensions for the year for which the contribution was made. An automatic six-month extension from the due date of the return, excluding extensions (i.e., generally to October 15) applies for individuals who have filed their tax returns by their tax return due dates.
October 31
Qualified Trust as Beneficiary
On or before October 31 of the year after the IRA owner’s death, the trustee of the trust must provide the financial organization with a copy of the trust instrument or qualifying documentation showing who the trust beneficiaries are as of the September 30 determination date.
SIMPLE IRA Plan Summary Description Deadline
The financial organization must provide a summary description to the employer that sponsors a SIMPLE IRA plan before November 1. The summary description must include
the employer’s and financial organization’s name and address,
the plan’s eligibility requirements and benefits,
the time and method of making employee elections, and
the procedures and effects of distributions.
November 1
Deferral Notice
An employer with a SIMPLE IRA plan must provide the deferral notice immediately before an employee’s 60-day election period. For an employee’s first eligible plan year, the 60-day election period may begin as early as 60 days before the date on which the employee becomes eligible or begin as late as the date the employee becomes eligible. Every subsequent year, because SIMPLE IRA plans must be maintained on a calendar year, the 60-day election period is the 60-day period immediately preceding January 1 (November 2 through December 31). Therefore, the deferral notice must be given to the employee by November 1. Along with the summary description for the plan, the deferral notice allows employees to elect to begin deferrals or to change prior deferral elections. It also informs employees of their option to select a financial organization for their SIMPLE IRAs if the SIMPLE IRA is not established with a designated financial institution (DFI).
December 1
HSA Eligibility
If an individual is HSA-eligible on the first day of the last month of his tax year, his HSA contribution limit for the year is the greater of the sum of the limits determined separately for each month, or the maximum annual contribution amount for the type of HDHP coverage in effect on the first day of the last month of the tax year.
December 31
RMD Deadline
Each year after turning age 73, Traditional and SIMPLE IRA owners must take their RMDs by December 31. Note that when IRA owners wait until their required beginning date to distribute their first-year RMD (April 1 following the year that they turn 73), they must also take their second-year RMD by December 31 of the same year.
December 31 is also the deadline for IRA beneficiaries who are taking life expectancy payments to distribute the required amount in any required distribution year. Beneficiaries subject to the 10-year account depletion requirement must do so by December 31 of the year containing the 10th anniversary of the IRA owner’s death.
Deadline to Establish Separate Accounting
If an IRA owner has multiple beneficiaries under a plan and separate accounts are established for each beneficiary by December 31 after the year of the IRA owner’s death, the beneficiaries may be treated separately for distribution elections and for calculating single life expectancy payments. If established during the year after death, beneficiaries may determine their required distributions separately for that year. For deaths in 2020 and later years, most nonspouse beneficiaries must deplete their inherited balance within 10 years—some with annual life-expectancy-based distribution requirements—and may not distribute it over their full life expectancy. Limited exceptions apply.
HSA Testing Period Ends
Individuals who are not HSA-eligible for the entire tax year but are eligible on the first day of the last month of their tax year are considered eligible individuals for the entire year if they meet certain requirements. They must remain HSA-eligible through the 13-month “testing period,” which runs from December 1 of the current year through December 31 of the following year.
Withholding Notice
Financial organizations must provide IRA owners with a notice of their right to waive withholding on nonperiodic IRA distributions or to have an amount other than the 10 percent default amount withheld. If an IRA owner is taking distributions quarterly or more frequently, financial organizations need only provide a withholding notice to the IRA owner once per year at a reasonable time before the first payment each year. If an IRA owner is taking distributions less frequently than quarterly, financial organizations must provide a withholding notice to the IRA owner no more than six months preceding each distribution.
Ascensus recommends providing the notice in December to IRA owners who take quarterly or more frequent distributions and to IRA owners who take an annual distribution in the first half of the year. Financial organizations should provide the notice again in June in order to cover IRA owners who take semi-annual distributions and annual distributions in the second half of the year.
* If the deadline falls on a Saturday, Sunday, or a legal holiday, the act is considered timely if completed on the next business day.
