In this week’s episode, IRA Financial’s Adam Bergman Esq. answers questions about contributing to a SEP and SIMPLE IRA in the same year, storing IRA-owned coins and tax filing when selling an IRA-owned property.
Question 1 from YouTube: Can you contribute to a SIMPLE IRA and a SEP IRA in the same year?
To be perfectly honest, the answer is both yes and no. Typical lawyer answer, I know! The answer is yes if you do not own more than 80% of both businesses. This would constitute a control group. Essentially, in the IRS’s eyes, if you own that percentage of multiple businesses, it treats them as if they were the same company. Therefore, you can only have one plan for the businesses that you own.
However, if you have two separate companies and one of them you do not own 80% of the business, then you can contribute to both a SIMPLE and SEP IRA in the same year. For example, Company A, that you own wholly, could offer a SEP IRA. Company B, where you only own 40%, could then offer a SIMPLE IRA. You may then contribute to each plan, since the control group rules do not apply.
Question 2 from Aaron H. in Great Neck, NY: If I were to purchase gold and silver coins with my Roth IRA, would I have to pay for storage or can I store them myself in my home?
Section 408(m) strictly prohibits one to hold IRA-invested coins personally. The bullion, bars or IRS-approved coins must be held in the physical possession of a depository or U.S. bank. There is some question if the intent of the rule applied to coins as well. After some research, it appears that all metals should not be held in your possession.
There is a grey area when it comes to safe deposit boxes. Yes, those boxes can be found in a bank and they would have possession of them. However, you have the key to the box, which you can open anytime you wish. Therefore, it’s best to not hold them in a safe deposit box. It’s always better to err on the side of caution. Your gold and silver coins will be protected at a depository or bank! You will also satisfy the IRS Code. Lastly, make sure they are held in the US and not abroad.
Question 3 from YouTube: In October of 2020, I sold two rental properties that were in my Self-Directed IRA LLC and at closing I received 1099s made out to my LLC. Should I fill out a W9 or any other IRS forms concerning this transaction?
This happens quite often, as a 1099 will be submitted when you sell a property owned by your Self-Directed IRA LLC. However, since the LLC is wholly owned by an IRA, there is no tax reporting. A W9 can be filled out, which essentially proves you are a U.S. citizen so there is no 30% withholding. A W9 is not necessarily needed in this case. Yes, the IRS may come asking about the 1099 income and why you did not report it. You simply need to show them that the LLC is owned by the IRA and no taxes will be due at the present time.
This is especially true for Single Member LLCs, since there is no annual reporting. If you have a Multi-Member LLC, you must file a Form 1065 for the partnership anyway. This will also show that the LLC is owned by the IRA. The same issue will occur for Solo 401(k) plans. Either way, there will be no tax consequences, so long as you let the IRS know that the IRA-owned LLC is benefiting from the sale of a property or other asset. If you want to file a W-9, you can check out how to do so in this video.
AdMail – Keep it Coming
We hope you enjoyed the latest episode of AdMail. Mr. Bergman will continue to respond to questions each week so long there is a demand for them! If you have any questions for him, email him at [email protected].
As with his other podcasts, you can check out AdMail on SoundCloud. Be sure to subscribe to know when the next one pops up! Thanks for listening and have a great day, Self-Directed Nation!