If you have a self-directed IRA LLC with multiple IRA members, here’s what you need to know regarding tax implications, and when to file in 2019.
A self-directed IRA essentially means that you have more investment options over your retirement assets/funds. More investors are using a special purpose limited liability company (LLC) to make IRS approved investments with IRA and 401(k) funds. This is especially the case among real estate investors.
When you use a special purpose LLC that your IRA owns, this is known as a “checkbook control IRA” or “checkbook IRA.”
Self-Directed IRA LLC Structure Means More Control
A self-directed IRA with checkbook control has a special purpose LLC. Again, your IRA owns this LLC, however you will act as manager of the LLC. As a result, you have the authority to make IRS approved alternative asset investments using your IRA. In other words, you make investment decisions on your own, without custodian consent.
In the future, with a self-directed IRA, if you want to make an investment, all you need to do is write a check or wire funds from the IRA LLC bank account.
Multiple Member IRA LLC
In the case of a self-directed IRA, a single member IRA LLC is not a requirement in order to file a partnership return (IRS Form 1065). This is because the LLC is treated as a disregarded entity for federal income tax purposes.
However, if two or more people own the IRA (multiple member IRA LLC), it’s treated as a partnership for federal income tax purposes. You will need to file a partnership return (IRS Form 1065) BY MARCH 15, 2019.
If the LLC is characterized as a partnership for federal income tax purposes, the LLC’s earnings are not subject to an entity tax level. Instead, they essentially “flow through” to the members, generally on a pro rata basis. Therefore, earnings are taxed just once.
Additionally, the LLC losses will flow through to the members. For the losses generated, the members may then deduct their ratable share.
Get in Touch
If you still have questions regarding your multiple member LLC, please contact IRA Financial Group directly at 800-472-0646. Our IRA experts will answer all of your questions. Let us know if you have additional questions on the tax implications of having a multiple member LLC.