At Equity Trust we work to be an instrumental part of your financial team. With that we understand consulting with other financial professionals is important.

To assist you with having meaningful and effective conversations, John Bowens goes through a list of common questions that CPAs and other financial professionals might ask when helping you make financial decisions around self-directed IRAs in this video segment.

Schedule a consultation:

We encourage our clients to give us a call and we can set up a conference call with your CPA or financial professional to ensure that we are all on the same page and most effectively assisting you.

Here are some of the questions your CPA or other tax professional may have that John covers:

1) What is the difference between a self-directed IRA and standard IRA?

2) Is it legal to hold real estate or other alternative assets in a self-directed IRA?

3) When buying a property or other alternative asset, are you taxed or penalized?

4) Can you partner your IRA with your non-IRA funds?

5) What are the annual filing or reporting requirements when holding property in your IRA?

6) Do you have to report the annual valuation of property or other ‘hard to value assets’?

7) How do I research an alternative asset custodian, so I know who I’m doing business with?…(read more)

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What Your CPA May Want to Know About Self-Directed IRAs

As a seasoned investor, you may have started considering self-directed Individual Retirement Accounts (IRAs) to diversify your investment portfolio and gain more control over your retirement savings. These accounts offer a broad range of investment options beyond the traditional stocks, bonds, and mutual funds typically associated with IRAs. However, before diving into the world of self-directed IRAs, it’s essential to understand what your Certified Public Accountant (CPA) may want to know about them.

1. The Basics of Self-Directed IRAs:
Your CPA will want to ensure that you understand the fundamental aspects of self-directed IRAs. Unlike traditional IRAs managed by a custodian or financial institution, self-directed IRAs allow you to invest in alternative assets such as real estate, private equity, precious metals, and more. These accounts provide the flexibility to diversify your retirement savings beyond traditional investments.

2. Record-Keeping and Reporting Requirements:
Your CPA will want to know about the specific record-keeping and reporting requirements associated with self-directed IRAs. With a variety of investment options available, it’s crucial to maintain accurate and detailed records of transactions, income, and expenses. This information is necessary to comply with IRS regulations and properly report your investments’ performance.

3. Prohibited Transactions and Prohibited Investments:
Understanding the rules and regulations surrounding prohibited transactions and prohibited investments is crucial for self-directed IRA holders. Your CPA will help you navigate these restrictions to avoid penalties and maintain your account’s tax-deferred status. They will ensure that you are aware of the IRA’s restrictions, such as not transacting with certain family members or investing in collectibles, life insurance, or subchapter S corporations.

4. Potential Tax Liabilities:
Your CPA will want to evaluate the potential tax implications associated with self-directed IRAs. While these accounts offer tax advantages like traditional IRAs, certain investments may trigger unrelated business income tax (UBIT) or unrelated debt-financed income tax (UDFI). Understanding how these taxes work and assessing the impact they may have on your investments is essential for effective tax planning.

5. Contributions and Distributions:
Your CPA will guide you through the contribution and distribution rules of self-directed IRAs. They will help you understand the maximum contribution limits, eligible contribution types, and the implications of early withdrawals or required minimum distributions (RMDs). Working closely with your CPA ensures that you comply with the IRS guidelines while optimizing your investment strategy.

6. Coordinating with Other Professionals:
Given the complexity of self-directed IRAs, your CPA may want to collaborate with other professionals, such as a specialized self-directed IRA custodian or real estate attorney. These professionals can provide specific expertise in managing unique assets, addressing legal concerns, and ensuring compliance with applicable regulations. Your CPA will work alongside these experts to ensure seamless coordination and proper management of your self-directed IRA.

In conclusion, self-directed IRAs offer significant investment flexibility; however, they require careful management and expert guidance to maximize their benefits and comply with IRS regulations. Engaging a knowledgeable CPA who understands the unique intricacies of self-directed IRAs is crucial. Their expertise will help you navigate the complexities, minimize tax liabilities, and ensure the long-term growth and financial security of your retirement savings.