March 2022 – Precious Metals Retirement Accounts: What You Need To Know
Precious Metals Retirement Accounts
As more taxpayers are looking for unique ways to save for retirement, many are exploring the idea of investing IRA funds in precious metals by opening a self-directed precious metals retirement account. There are strict limitations regarding precious metal investing in self-directed retirement accounts, and we wanted to share a few helpful tips to keep in mind.
The IRS has provided guidelines for the precious metals that are deemed valid IRA assets. They are as follows:
Certain gold, silver or platinum coins described in 31 USC Section 5112 to be of specific dimensions and weights.
Any coin issued under the laws of any state.
Any gold, silver, platinum, or palladium bullion of a certain fineness if a bank of approved trustee retains physical possession of it.
It is important to note that any other collectibles (such as art and other antiques or valuables) outside of the items listed above are not considered valid IRA investments, and are immediately distributed from the IRA account. The amount of these distributions is then generally the cost of the collectible at the time it was acquired, and is taxed as ordinary income. The 10% early withdrawal penalty may apply if the recipient is under age 59 1/2.
Prohibited Transactions – IRA Accounts
Generally, a prohibited transaction in an IRA account is classified as any misuse of the IRA. The following are examples of prohibited transactions in an IRA:
Borrowing funds from it
Selling property to it
Using it as security for a loan
Buying property for personal use with IRA funds
As listed above, these transactions indicate self-dealing which is not permitted in retirement accounts – as a general rule, third-party oversight is required. Generally, if an IRA owner or beneficiary engages in a prohibited transaction, the account loses its IRA classification. Once the IRA classification has been compromised, the IRA is dissolved and the remaining funds are fully distributed to the owner. This could result in a major tax bracket increase and tax consequences for the fund owner or beneficiary, so it is important to know and follow the custody and oversight rules for IRA accounts.
Custody & Management of Your IRA
In general, third-party oversight is required (IRC 408(a)(2)) over retirement assets as a protective measure against self-dealing and other prohibited transactions. For precious metals IRAs, custody and oversight of the IRA assets is even more stringent because the assets tend to be tangible and self-dealing opportunities are more prevalent. For example, if an account owner were to store their precious metals assets within their own home, they would be lacking the required third-party oversight for the assets and could potentially violate IRA rules by engaging in prohibited transactions without being aware they are doing so. As such, it is important to consider IRA rules and guidelines regarding precious metals retirement investing to ensure your retirement investments are not compromised.
In saving for retirement, there are also areas of fraud to watch for in self-directed IRAs. While most IRA custodians limit IRA investments to certain pre-approved stocks, bonds, mutual funds, and CDs, a self-directed IRA such as a precious metals IRA is held by custodians who allow investment in a broader and riskier set of assets. The risks associated with investing in unique assets such as precious metals include lack of appropriate disclosure and liquidity, as well as the risk of fraud due to unscrupulous investment custodians.
Please do not hold your IRA assets in your custody, even if your IRA is self-directed. Maintaining custody of your own IRA assets is against the IRA rules and could lead to increased risk of self-dealing and other prohibited transactions, both of which could compromise and dissolve your hard-earned retirement savings.
Select a reputable custodian for the account who will maintain custody of the IRA assets. Please see the IRS list for approved custodians.
Be aware of fraud related to retirement accounts. Review and verify all information in the statements from your self-directed IRA accounts. Avoid unsolicited investment offers and exercise caution when investing in additional assets. Be wary of guaranteed or exceptionally high returns, and ask questions.
Please reach out to us with any questions at all as you navigate the complexities of a self-directed IRA, and if you suspect fraud or are concerned you might be dealing with a questionable investment source.
2022 FILING DEADLINES
APRIL 15, 2022 – Federal and state income tax returns are due for individual taxpayers, C-Corporations, and Estates and Trusts
SEPTEMBER 15, 2022 – Federal and state income tax returns are due for flow-through entities, including partnerships and S-Corporations if extended
SEPTEMBER 30, 2022 – Federal and state income tax returns are due for trusts if extended
OCTOBER 15, 2022 – Federal and state income tax returns are due for individual taxpayers, and C-Corporations if extended
2022 ESTIMATED PAYMENT DEADLINES
APRIL 15, 2022 – 1st quarter estimated payments for 2022 are due to the IRS and Colorado Department of Revenue
JUNE 15, 2022 – 2nd quarter estimated payments for 2022 are due to the IRS and Colorado Department of Revenue
SEPTEMBER 15, 2022 – 3rd quarter estimated payments for 2022 are due to the IRS and Colorado Department of Revenue
EMPLOYEE SPOTLIGHT: BAILEY BYRNES
Bailey joined the Soukup, Bush & Associates team in August of 2021. At the firm, she assists other team members in preparing individual and business tax returns.
She moved to Fort Collins from Southern California to attend Colorado State University. She initially graduated from Colorado State with a Bachelor of Science degree in Business Administration with an emphasis in accounting. She graduated with a Master of Accountancy degree from Colorado State in 2021.
In her free time, she enjoys playing soccer, rock climbing, cooking, and hiking.