Home Storage Gold IRA & Taxes

Tensions in North Korea, Russia and the growing threat of hurricanes has led investors to seek out new investment opportunities. Companies promoting “home storage” IRAs for precious metals have sprouted up with the goal of helping anyone create a business that can hold precious metals in an IRA.

These companies promise no fees, banks and immediate access to IRA funds as needed.

The goal is to eliminate traditional gold IRA custodians and replace them with your own company that holds the gold. The IRS was asked about ads promoting this type of home storage IRA, and stated, “The IRS cannot comment on claims made by any particular IRA promoter, but the agency warns taxpayers to be wary of anyone claiming that gold held in your IRA can be stored at home or in a safety deposit box.”

IRAs work to the retiree’s benefit because taxes aren’t taken out of the account. At-home storage IRAs face prohibited transaction risks that may result in a tax penalty plus owing the IRS income tax on the IRA balance.

The tax would be 35% or more of the retirement value.

The Internal Revenue Code, Section 408(m)(3) allows investing in gold and precious metals, within an IRA fund, legal. The code requires, in most instances, a custodian or financial institution be involved in setting up the precious metals IRA as a self-directed IRA. Specialized handling and security are required to hold the physical assets.

A great issue arises when viewing Internal Revenue Code Section 408(a). The Code requires a “trustee” to meet the following restrictions:

“The trustee is a bank (as defined in subsection (n)) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section.”

While it’s possible to create an LLC or another company that meets the IRS’ requirements, it’s difficult to do for the normal retiree. The entity must provide an application to the IRS and meet requirements for fiduciary experience, bonding, audits, net worth, capacity to account and numerous others.

The IRS must approve the application before the person can properly maintain a “home storage” IRA. The trustee requirement entrusts a person’s retirement savings with an entity that can properly administer the IRA in a matter that is consistent with the IRS’ guidelines.

The legal advice and expertise needed to form an entity that meets the guidelines of a trustee will be extensive. Legitimate, professional IRAs are the safe and legal way to have an IRA set up without the risk of losing 35% or more of the account to taxes.