A couple stored IRA gold at home and ended up on news outlets for the wrong reasons. The Rhode Island-dwelling couple owes the IRS over $300,000 for the lack of knowledge about a very significant detail in the gold IRA-investment process – It is illegal to hold IRA gold at home. This is a rule that may be unknown to many potential gold investors, and I’d urge you to read on till the end of this article to know what exactly went down, and what you ought to know to ensure that you do not end up in the same predicament as this couple.
What Happened to The McNultys?
Investing in the present-day world calls for one to tread very carefully by ensuring that they do not get on the wrong books with the IRS. This holds for all types of assets, but you will want to practice extra caution when investing in alternative (non-traditional) assets, such as precious metals, cryptocurrencies, mineral rights, and real estate.
Unlike traditional assets, which more often than not require an investor to coordinate their investment efforts with an expert such as a broker, there is minimal supervision when it comes to investing in gold since the gold IRA structure is meant to give the investor more control and freedom.
This freedom, unfortunately, led to Mr. McNulty and his beloved wife Donna Dearly storing their IRA gold at home. The perception most people have is that once they open their gold IRAs, they will get the opportunity to hold their physical gold at home, or at a local storage facility.
I mean, who would not want to be smiling back at their reflection on a gold bar that they purchased using their hard-earned money? That’s what the McNultys thought too. Not for long, though. It was just a matter of time before the IRS came sniffing and established that they had broken the rules of gold IRA investing.
Upon the completion of an annual audit, the judge overseeing the case in the Tax Court gave the verdict that this couple would pay:
- $270,000 in taxes on their IRA assets worth $730,000
- Over $50,000 in related penalties.
Putting to Rest Home Storage Gold IRA Myths
The ruling, which was given in a Rhode Island Tax Court, dispelled the myth about the storage of IRA gold at home. For many years, some Gold IRA companies have lured investors by proclaiming that one of the advantages the gold IRA owners would get upon opening their accounts was the ability to store their IRA gold at home.
The McNulty case proves how detrimental the repercussions of following such companies blindly can be.
Many other investors who have fallen prey to such home storage gold IRA scams have mostly done so out of the need to avoid the gold storage fees, which depending on the type of precious metal depository used, can be quite high.
Thing is, however, you may save about $350 in storage fees by storing your IRA gold at home, only for you to lose thousands of dollars in taxes and penalties when the IRS finds out that you are not following the rules.
False and Misleading Gold IRA Ads
If you are new to gold IRA investing and you have no idea about how to identify which companies in this industry are legit, then it is highly likely that you will encounter a pretty convincing Ad about how you can open a Home Storage Gold IRA.
Such Ads often carry the appeal of helping you get your hands on expensive precious metals so that you can grow your wealth faster. It is easy to fall for such lies, but the truth of the matter is that Gold, just like any other asset, is subject to price rises and declines, subject to many factors in the market.
Most of the misleading Ads will often be coated with some truths you already know about gold IRAs, such as the fact that you can transfer or rollover the funds in your existing retirement plan ( e.g. your Traditional/Roth IRA, or 401(k)), into your gold IRA.
Such companies are usually waiting on the other end to sell you the expensive precious metals, after which they leave you out there to figure out how you will store the assets on your own. The IRS is ferocious, and if it catches you lurking in unsafe territory, it will strike hard and tear your dream of having a blissful retirement to pieces.
I Still Want to Open a Home Storage Gold IRA, is There any Chance I can do That?
Yes. However, the odds that you will not regret your decision to do so are very low. The IRS generally prohibits home storage gold IRAs but provides an opportunity for those who would love to give it a shot to do so anyway.
They, however, have to meet a list of qualifications, and if they are found not to be compliant, the opening of the home storage gold IRA will be perceived as a taxable deduction from their retirement account, and that as you know is not a good thing. For you to even think you could open a gold IRA, you must:
- Establish a limited liability company in your name, and ensure that you have a special operating agreement from the IRS.
- Prove, after the incorporation and audits, that you have a net worth of over $250,000.
- Have all employees and trustees of the LLC put up $250,000 to act as corporate insurance.
- Ensure that the trustee corporation is divided among different parties.
- Prove that you have verifiable fiduciary experience and that you have the capacity to handle retirement funds.
- Choose a trustee or custodian company that has a publicly known and accessible location.
- Have corporate legal counsel on a retainer basis.
- Give a detailed audit done and presented by a qualified public accountant annually.
As you can see, an attempt to open a home storage gold IRA is akin to inviting the IRS into your business.
The chances that your finances will be audited and that you will be perceived as a non-qualifying candidate are quite high, and they will only cost you dearly in the form of immediate taxes and penalties.
If you are under 59 ½ years old, the IRS will strike with a 10% early withdrawal penalty, and that may severely hurt your portfolio in a manner that you may never fully recover.
I’d generally advise that you simply follow the regular gold IRA investment process, in which your precious metals are stored in an IRS-approved depository. You can also request that your gold coins and bars be stored in a segregated storage unit.
Ok, So are Gold IRAs Worth Opening Anyway?
Well, I am sure at this point your prospects of investing in gold may be dwindling fast. This is quite understandable because no one wants to lose their retirement savings to such scams.
Now, before you turn the other way and start looking for other assets, let me drop one fact real quick- there are legit gold IRAs that you can still turn to if you need to invest in physical gold. You will, however, need to take some more time to do your due diligence.
I have been reviewing many gold IRA companies for several years now, and I have managed to shortlist a few that have proven their worth in this industry.
If you spot any company on that list that has the features that you are looking for, you can proceed to check out its consumer trust ratings and customer feedback on consumer trust sites such as Trust Pilot and the Better Business Bureau.
Having a hard time deciding which Gold IRA company to rely on?
Enjoyed this article about how a couple stored IRA gold at home? Let me know by dropping a comment in the section below this post. If you also have more questions about this post and gold IRA investing in general, let me know as well. Finally, share this post with anyone who you know is thinking about opening a gold IRA, so they can avoid making the grievous mistake this couple made.
I wish you well.
Eric, Investor and Team Member at Gold Retired!