The process of setting up a gold-backed IRA can be confusing and overwhelming for many people. Especially when you consider all the rules and regulations that you have to take into consideration in order to be compliant with the IRS.
In this article, I’m going to explain the main rules that you need to know in order to be compliant with government regulations.
Types Of Gold
The IRS requires that the gold deposits you make in your retirement account must be up to their standards so that it can be considered as a part of your investment.
All your gold should come from recognized and known manufacturers like Nymex or LBMA and they should have a minimum purity level of 0.995. They should be certified by ISE-9000. Seems too much? There’s more to it!
You can also have gold coins deposited into your IRA, but these coins should also come up to the similar standards as gold bars. Collectible coins cannot be a part of it, neither coins which come from an unapproved mint.
You should be sure that you follow these quality guidelines if you are looking for successful tax free deposits, otherwise the IRS might view it as a withdrawal rather than a rollover to IRA. You will also need to pay income tax on the money and if you under 59 you will be penalized with an additional 10%.
You Need A Custodian
If you are looking forward to invest gold in your IRA you will need an eligible custodian for it who is willing to do this.
Finding the right custodian may seem hard at first; because they need to be someone that you can trust to store your gold away securely. A large number of custodians work with a depository to store you gold and keep it protected.
If you are unable to find a custodian who is unwilling or hesitant in dealing with gold, you will most certainly have to find one who can. You will need to create a self-directed IRA so that you may invest in whatever you want and the custodian would simply follow your lead. There are several companies out there providing invest-in-gold services but there is one which stands out, Regal Assets. If you are looking to invest gold in your IRA, be sure to visit Regal Assets for an all-round guidance which complies with these rules.
IRA investors must maintain a gold IRA, this means that the custodian who holds your gold and other precious metal investments should accept these investments as well.
However, the IRS doesn’t require the custodian to allow every possible investment so it is primarily up to you to find the right custodian to maintain your account. The custodians are required to deposit all your gold at a third party depository, you, or whoever the investor is, are not allowed to possess gold bullion or coins, doing so will be considered as distribution and will be fully taxable by the IRS.
When planning to roll over your IRA to gold, you should be sure that you keep these restrictions and time constraints in your mind. You must complete the roll over within 60 days, if you fail to do so, the transaction will be viewed as a withdrawal and the IRS would tax you accordingly.
You will also be prevented from making any transactions in the IRA account you are rolling to and the IRA account you are rolling from for almost a year, so before you start and take things further, be sure this is what you want to do and make wise decisions.
If you are just beginning with an IRA, some funding restrictions will be imposed on you. Initially you are only allowed to put a maximum of $5000 into your IRA account; if you want to increase this limit, you will have to build p your funds steadily over a year.
The only one way you can put more than $5000 into your IRA account is through a transfer or a roll over. These funding restrictions should also be taken into consideration before you decide to roll over.
Considering the IRA rollover rules, all 401k to gold rollovers must be reported in all cases. When you choose a custodian, they should send you a form to attach to the year ending tax return, this form informs the IRS that the account in which your funds were re-deposited was approved and you can avoid paying penalties.
When you sell gold inside your IRA after which you withdraw money you are taxed according to normal income tax rules on the amount you withdraw. If you want a physical receipt of the gold you have in your IRA, you are taxed according to the amount of gold present.
As of 2011, when you liquidate your gold you need to pay capital gains tax which is calculated at a rate of 28% on the value of the gold at the time of withdrawal including your investment cost basis.
When making a transaction in your rollover IRA account you should consider the initial goals you had before you started this. If your goal was to create a long-term profitable solution it is better you let your gold sit in its physical form. Be sure that you comply with all the rules and guidelines to satisfy the IRS and IRA criteria, this will ensure that your gold rollover turns out to be profitable for you and this way, you can avoid a lot of taxes.