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  1. Say an individual's self-directed IRA owns a business, and the individual is curious which (if any) services he can provide to the business (ex. offer consulting services). Question is, does this run afoul of the prohibited transaction rules? I'm thinking yes, with respect to Code Sec. 4975(c)(1)(C) - because it would involve a disqualified person furnishing services to a plan asset (akin to the individual being prohibited from providing free labor/repairs to an investment property owned by the self directed IRS). Curious if others agree, or have other thoughts.
  2. my dad passed a few months ago, somewhat unexpectedly after a brief but serious illness, so my siblings and I are dealing with the aftermath of not having everything wrapped up in a neat little ribbon. he had an IRA that was paying him a small monthly installment to cover his annual RMD. my mom wanted to transfer the IRA to her own and continue getting the monthly installments, but the custodian is telling us there was no beneficiary designation on file (what? hard to believe my dad didn't do this!) and the only default is to an Estate, and taxable. why wouldn't it be to a spouse? I deal mostly with qualified 401k and retirement plan distributions so an IRA is out of my field of expertise. we continue to search for old documents at the house, but in the meantime am looking for some guidance. is this normal for an IRA? it doesn't make sense that mom will have to get an attorney and set up an estate, go thru probate, have to pay taxes (and legal fees!), etc. thanks!
  3. Hello, Helping someone who has a Traditional IRA at one company and has a Solo 401k plan with Fidelity (I think its called Keogh Plan but it is a self-employed 401k). He's trying to consolidate accounts at Fidelity who tells him that he can move assets from Traditional IRA to the Keogh Plan as the Keogh Plan is a Qualified Plan. Is that correct? Can he do that? What are the pros and cons of doing this? Thanks
  4. With the tax filing extension from 4.15 to 7.15, does anyone know if IRS has extended Form 5498 delivery date from 5.31 to something else?
  5. Question #1 - Under the provisions and requirements enacted by the Secure Act for 2020 and beyond, if an IRA owner dies in 2020 or after, and was past their RBD at the time of their death, must a designated beneficiary (who does not qualify as an eligible designated beneficiary) continue to take an annual RMD beginning by 12/31 of the year following the death of the owner, but then also deplete the account by the end of the 10th year after the death of the owner? Internal discussions in my workplace differ, some saying the RMDs are suspended at the owners death, and that the beneficiary can let the balance sit untouched for the 10 year period. Others, believe RMDs must continue but account must be depleted at 10 years. Question #2 - If an eligible designated beneficiary or designated beneficiary (if the answer to #1 above is yes) fails to take a RMD, by the required date after the owner's death, is it merely a failed RMD subject to the 50% excise tax/penalty for the shortfall, or do their payout options default to something else, like the 10 year rule?
  6. Last year, I had significant capital losses in a cash management account held at Merrill Lynch. I used the $3,000 last year as a way to reduce my taxable income and I still have several thousands that I can roll into 2019 tax year. My question is, can I use those losses to offset a conversion of funds from my traditional IRA to my roth IRA? Assuming I transfer 10,000 dollars from my traditional IRA into my roth, and assuming I have a tax rate of 25%, that $2,500 would essentially be nullified by my $3,000 capital loss carryover? Am I correct with this assumption or do the capital losses have to come from one of the ira accounts?
  7. I have a client that recently converted s corp (solely owned ) to an partnership llc (store manager of 16 years). This happened 1/18/2018. They had been contributing to a simple ira 3% match. Store manager (who has been taking a payroll check of $65,000/yr) just told me that she is only taking draws, stopped getting a payroll check upon conversion 1/18/18. She is telling me that company tax preparer has no issue with her not taking a paycheck and that she needs to convert company plan to something that would allow her to make pretax contributions without having to take a paycheck (earned income)? they have not hired someone else to fulfill the responsibilities in the operation. Any ideas? Can the partners make pretax contributions and company match 3% on draw? Is there something I'm missing about her moving to partnership status.stopping the $65k/yr earned income via payroll and only receiving a draw of the exact $65k and not having an explanation of who is the workload? Thanks in advance for any guidance.
  8. Has anyone else had a problem with the IRS issuing letters stating that an IRA rollover is taxable income? Five different participants rolled traditional IRA money into their 401(k) plans (4 separate plans, all different employers) in 2016. the 1099-Rs appear to have been issued correctly, showing a code G since they were all direct transfers, and zero taxable amount. These five individuals all received letters in the last few months stating the amounts rolled over were taxable and listed the amount of tax and interest due. In at least one instance the letter even mentioned that the 1099 had a code G on it. I'm not sure, but I think the common denominator may be that none of these individuals reported the rollover on their personal tax returns. Rather than reporting the rollover with zero listed as taxable, I think it was left off the return completely. I can't confirm for all of them, but for at least one this is the case. I do know the IRS sends out letters if things are reported to them by employers / financial institutions / etc and don't match up with what some reports on their personal return. But ultimately, the amounts aren't taxable, so saying the rollover IS taxable seems ridiculous. We see our clients do a lot of rollovers, usually without a blip from the IRS, so to have several this year with inquiries feels like a lot, but maybe it is typical for the IRS.
  9. Hi to All, A client has a profit sharing plan currently with only the owner and his wife as participants. They want to invest the assets in a real estate program of some sort and have decided to terminate their plan and roll their funds to an IRA for each of them. Each IRA will invest in the real estate. The question came up as to whether it would be better to keep the money in the plan and let the plan invest in the real estate, because there would be more bankruptcy and creditor protection within the plan than outside of it. Is that true? Does the answer change when only a husband and wife are participants? Does the answer change if they amend and restate the profit sharing plan as a Solo 401(k) plan? Thanks in advance for any advice! I did look on the internet and found one article that states there is absolutely more protection within the current plan, and yet another one that said there is some kind of exception to that protection for Solo 401(k)s. We're confused.....
  10. - 401k distribution to terminated participant's IRA. - IRA owner decides to convert the rollover to ROTH. Question: Do the converted ROTH assets continue to receive unlimited asset protection?
  11. The owner of an IRA engaged in a PT in 2011. We know the consequence is all assets in the IRA are treated as having been distributed to the owner at their 1/1/2011 value and the account is no longer an IRA as of that date. We're planning on filing amended individual income tax returns for 2011 and forward and reporting the deemed distribution on the 2011 return (fortunately the owner was over 59 1/2). We'll also report all investment income/expenses and realized gains/losses in the account as adjustments on the amended individual returns along with backing out the RMDs. We're assuming the investment holding period for purposes of determining whether realized gains/losses are short or long term started at the 1/1/2011 deemed distribution date. Does this sound like the correct reporting? Does the IRA custodian have to file amended 1099-Rs and Forms 5498? Anything in the way of other disclosures/reporting that we should be concerned about? Thanks
  12. Can anyone give me the names of financial institutions that will work with a small employer to set up traditional IRAs for employees and accept contribution via payroll deductions? Client's bank seems unwilling to do it. Thanks in advance!!
  13. We have a defined benefit plan with only one employee in the corporation. We would like to terminate the defined benefit plan and roll the assets into an IRA. However, the assets are shares of a corporation in another country. Also real estate in the US. Our intention is to use an IRA custodian like PENSCO that can handle real estate in the portfolio. I know that we have to get the shares of this foreign corporation appraised for purposes of rolling the defined benefit plan into the IRA, but I don't know who it is that I should hire to assess the value of the foreign corporation. Any ideas?
  14. We are establishing a SIMPLE using the 5305 form as a business that has been in operation for years, but we have never had a retirement plan. The IRS notes that the election period can be amended if the plan is established between January 1, and October 1. Does this mean that we can reduce the 60 day election period, and enroll our employees immediately if they all turn in their form?
  15. We have some unresponsive SIMPLE IRA participants who are terminated with their employer. Is it possible to do some kind of "force-out" distribution similar to 401(k) accounts under $5000? I am struggling to find specific information about this process. Thanks!
  16. Ok, I know this one has been covered before, but I am not certain it has been addressed in the following manner. Regarding mid-year amendments to SIMPLE IRAs, the IRS has provided some guidance in the form of an LRM (2005 LRM) and a 2012 Newsletter suggesting that a mid-year amendment is not permitted. However, what isn't clearly addressed is what portion of the code/regulations the IRS is relying on to come to their conclusion as well as what the consequences would be. My thoughts are as follows: Since SIMPLE IRAs are governed solely by IRC 408(p) and Notice 98-4 (the LRM and Newsletter to not qualify as code/regulations), and Notice 98-4 clearly states that an employee must be provided with annual notices (e.g. summary description and right to defer, including right to select financial institution if applicable) prior to November 2 of each year; a mid year amendment affecting the information required to be in such notices would result incorrect notices having been provided and thus, not meeting the notice requirements. That being said, my understanding is that the consequence would be a $50/day penalty (pursuant to Notice 98-4, Q&A section G). Beyond that, I am not aware of any additional consequences formally provided in the code/notice. The SIMPLE IRA fix it guide addresses the situation and simply provides that a reasonable correction should be made. As a result, it would seem to me that if a sponsor was willing to accept a $50/day penalty and make reasonable corrections (depending on the situation), a mid-year amendment could be made. Is there anything I am missing or any other portion of the code/notice for SIMPLE IRAs that I haven't considered that prohibits mid-year amendments? Thoughts are greatly appreciated.
  17. Hello, I posted this topic at bogleheads.org and was recommended that I post here as well. Hoping for any help I can get. When I became eligible to receive employer contributions into an IRA account, I went to my credit union (since my wife and I have several accounts there already). I had no knowledge of the different types of IRAs and simply told them that I needed an IRA account to accept employer contributions. The teller opened a traditional IRA for me, apparently not realizing that this was the wrong account to accept matching contributions from an employer. My employer began sending checks to this account (flagged as SIMPLE contributions) with my contribution plus a matching amount, and no red flags were raised. This was in January of 2014. Fast forward to three weeks ago. My credit union's IRA department was internally audited, and my account was flagged as being coded incorrectly—it couldn't accept contributions to a SIMPLE IRA, because the credit union does not offer a SIMPLE IRA. News to me. I'm currently opening a new SIMPLE IRA account to accept future contributions, but I need to get the money that was incorrectly placed in the traditional IRA out and into the SIMPLE, where it should have been all along. Both my employer and myself have filed our taxes as if the account was a SIMPLE this whole time, so technically it shouldn't make a difference to the IRS if the amount that moves to the SIMPLE is identical to the amount my employer reported contributing. The traditional IRA would be closed as if it never existed (because it shouldn't have). How do I do this without incurring some sort of penalty? It's not a rollover, nor am I withdrawing funds early—the credit union simply made an error and opened the wrong account for me. Any suggestions would be extremely welcome. I've tried to research this online and it seems to be such an oddball occurrence that I can't find mention of it anywhere. Thanks, Ryan
  18. Can IRA owner rollover error be repaired during current tax year cycle? In February, 60 year old IRA owner takes $8,000 distribution. In March, replaces funds as a “Rollover Contribution”. In December, changes IRA custodians, UNFORTUNATELY, Original custodian sends check made out to IRA owner’s name (e.g. a rollover) instead of new Custodian’s name (e.g. a custodian-to-custodian transfer). IRA owner deposits check in new IRA with Custodian B. Since IRA owner has not completed tax forms for the year, can he remedy through re-characterization? For example: Re-characterize $6,500 of the $8,000 March Rollover Contribution as a Regular Contribution, Withdraw the extra $1,500 as an excess contribution, Deposit the extra $1,500 as a regular contribution to spouse IRA to mitigate the income tax? Or are other remedies available, given that this is within the current tax year cycle?
  19. -investment manager/broker for bank screws up by executing a trade twice -gets the administrative people at the bank to fix the loss by carrying out transaction on his own personal IRA -is this a prohibited transaction? has he "dealt with the assets of a plan for his own account"? Also, where is the best place to find examples of prohibited transactions in self-directed IRAs? ERISA cases, DOL Advisory Opinions, Private Letter rulings? I'm having trouble finding official sources that give examples. Thanks in advance for any responses.
  20. How to rollover inherited401k. Is it true the partner get special benefits from internal revenue services while they inherit retirement account including 401K plans.
  21. Prudential administers our physician office's 401(k) plan. However, we have some physicians who have “self-directed” accounts which are an off-shoot of the company 401(k) plan and those funds are held at another brokerage firm such as Charles Schwab. We have a physician who is retired and wants to roll over his 401(k) to an IRA, but Prudential is telling us that this physician must first move his money from his self-directed account back into Prudential in order for Prudential to process the roll-over. The physician is questioning whether that is a legal requirement as he prefers not to move his money from Charles Schwab back to Prudential because the physician will not be able to replicate his Bond portfolio with Prudential. The physician would prefer to move his money directly from Charles Schwab to his IRA. Can anyone shed light on this? Is it possible to rollover directly from the self-directed 401(k) account to an IRA? Or must the self-directed account first be moved back to Prudential before the rollover can be processed? Thanks.
  22. I know for IRAs, you are only permitted to take distribnution and re-contibute the money within 60 days in order to avoid the taxes once within a 12 month period. Are there similar rules for 401k? I know i can take a distribution and re-contribute the funds within 60 days, but is there a limit to 1 per year? If so, and you have a 401k and IRA, can you take a distribuiton from each and re-contribute within the same 12 month period? Also, I know you are permitted to take a distribution from a 401k and roll it into an IRA to avoid taxes, can the same be done with an IRA? Can you take a distrbution, then roll it into the 401k within 60 days to avoid taxes? If this is allowed, then couldn't you take as many distirbuitons from an IRA in any year as long as you roll it into the 401k within 60 days? Thanks
  23. An IRA Owner would like to direct investment into a newly forming privately held US Business, whereby he would have an equity interest of less than 10% (probably less than 5%). It should be noted the IRA Owner would be a member of the advisory board as a recognized professional with immeasurable experience and knowledge as it relates the product the company is developing and will ultimately be marketing. Would this be a Prohibited Transaction? If the IRA Owner is not a member of the advisory board would the answer change? Would being a member of the advisory board raise self dealing issues? The business is developing and ultimately will market an implantable prosthetic. Would this trigger Unrelated Business Income issues? The company is expected to be quite successful and the IRA Owner would like the investment growth to occur in his tax deferred IRA rather than his personal asset portfolio for tax reasons. Could this person who has a non-Title I DBP make the same investment using the DBP assets? The issue of liquidity is understood. The need for annual valuation of the privately held investment for plan valuation purposes is also recognized. Thank you
  24. Client has an Employer Sponsored Individual Retirement Account plan - adopted in 1978. The employer withholds the participants' IRA contributions (all are after tax) and the participant's match is also taxed, and makes the deposit to an omnibus IRA trust. Now it's up to each participant to claim the deduction (annually) to convert this contribution to a pretax benefit. What happens, however, when a participant doesn't claim the deduction? Maybe due to the fact that the participant couldn't take the IRA deduction for that year and/or subsequent years? The plan now terminates and the trust holds after-tax IRA money? Where can it be rolled? Is it treated like a ROTH? The Plan doesn't allow ROTH. Any ideas?
  25. I reach age 70 1/2 this year. I have four Individual Retirement Accounts, two of which contain Individual Retirement Annuities and nothing else. The annuities have not been annuitized. I don’t plan to annuitize them for a couple of decades. Can I add up the Required Minimum Distribution (RMD) from these and take the total from one of the Individual Retirement Accounts not containing an annuity and by doing so satisfy my RMD for all of the accounts and annuities? Does the fact that the annuities are in Individual Retirement Accounts make a difference?
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