Home Storage Gold IRA Sees Couple Fined $300,000 in Back-Taxes

The price of choosing the wrong gold IRA company: $300,000

Bullion.Directory precious metals analysis 06 December, 2021
By Peter Reagan
Financial Market Strategist at Birch Gold Group

But just as one might inadvertently buy bullion of a less-than-stellar quality, so too can gold IRA investment become a decidedly suboptimal investment for those willing to cut corners.

As reported by The Wall Street Journal, a Tax Court of Rhode Island judge deemed that a local couple who stored their IRA bullion at home must pay over $300,000 to the IRS in back-taxes. The pair transferred over $750,000 of retirement funds into a self-directed IRA in the form of an IRA LLC (also known as a “home storage” or “checkbook IRA”). A good part of their retirement funds went into physical gold and silver.

And even though the couple did their best to follow the rules, they failed:

Mrs. McNulty, a registered nurse, was careful with her IRA’s coins in some ways. She opened a bank account in the name of the LLC, documented the purchase of the coins, and labeled the coins as belonging to her IRA-owned LLC when she put them in the couple’s safe.

However, the judge ruled that her “unfettered control” of the coins, if upheld, would be ripe for abuse. He clarified what some saw as a gray area and said the law requires independent oversight of investments in coins or bullion by a third-party fiduciary — so it doesn’t allow for storage in a safe at home.

See, gold and silver storage in one’s home as part of an IRA isn’t necessarily illegal, but it can complicate matters significantly. Especially if the owners are trading the assets. An IRS audit showed that the husband engaged in prohibited transactions over the course of two years, which dissolved the IRA and incurred fines and penalties amounting to 40% of their total retirement savings. It’s clear the couple had insufficient knowledge to manage their IRA legally. Worse, the self-custody of tangible investments like this is a red flag to the IRS.

Cases like these are examples of why Birch Gold does not recommend home storage or “checkbook IRA”-type accounts. Rather, Birch Gold chooses straightforward and transparent custody and storage of our customers’ precious metals. Licensed, established and reputable depositories offer much greater security than a wall safe or a nook under a loose floorboard.

Birch Gold’s custodial partners can help you navigate the potentially treacherous rules and regulations imposed on tangible assets in retirement accounts.

Granted, there are other ways to handle a gold IRA. However, as this unfortunate case makes very clear, the risks can be vastly greater than the rewards.

This article was originally published here

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