What is a home storage gold IRA? What are the rules surrounding the opening of such an account? Is it actually allowed by the IRS? Join me in today’s post, in which I will take you through a very important topic that you ought to know as a potential or current gold investor. Let’s get into it right away.
Introduction
Many people often turn to precious metals to seek the safety that conventional investments have denied them. With the current state of the global financial system, it makes more sense why more investors would want to consider adding some gold to their investment portfolios.
Individuals who try to open a special precious metal investment account known as a Gold IRA are often waylaid by companies claiming to offer them the opportunity to store their physical gold at home.
It is quite easy to fall for the allure of the home storage gold IRAs. You, however, may want to familiarize yourself with the laws pertaining to the opening of such accounts and ensure that you are upholding all gold IRA investment rules and regulations.
The one thing you will discover as you are getting started with investing in gold through an IRA is that there is conflicting information pertaining to the risks and benefits of home storage gold IRAs. You will, as such, need to cut through the clutter to establish what the truth really is.
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Regulatory Compliance: What the IRS says about Home Storage Gold IRA!
The one thing every investor ought to be careful about during their investment journey is to never do anything that leads to unnecessary attention from the IRS.
It can take a single visit (read audit) from the IRS for your entire investment portfolio and investment dreams to come tumbling down like a house of cards.
You can read about this tax-horror story of a couple who decided to store their IRA gold at home.
For starters, let me say that the IRS is generally against investors opening home storage gold IRAs. If you, however, feel that you cannot do without seeing your gold bars and coins, then you can go ahead and prove to the IRS that you have what it takes to open such an account.
Here are some of the qualifications that you are expected to meet:
- You need to open a Limited Liability Company (LLC) and obtain a special Operating Agreement from the IRS.
- Ensure that your account custodian has a publicly known business premise.
- Make arrangements for very detailed annual audits from a certified public accountant.
- Have multiple owners of your LLC.
- Establish an ongoing retainer agreement with an attorney.
- Prove that you have a net worth of $250,000 or more.
- You should have a fidelity bond of $250,000 for every owner and employee of your LLC.
As you can see, the IRS is not highly interested in having many individuals open home storage Gold IRAs. An assessment of the above-listed rules will show you that very large administrative costs are required to get a home storage gold IRA up and running. Not forgetting that putting everything together will come with extra and time-consuming paperwork.
Woe unto you if you try to open a home storage gold IRA, and the IRS finds out that you have not been compliant with all investment rules.
If you get audited and it is discovered that you slipped on some minor details, then the retirement funds you have deposited in your home storage gold IRA could be treated as a distribution. This in itself translates to the automatic loss of your tax benefits. It gets worse if you are under 59 ½ years old – the IRS will strike with an additional 10% early withdrawal penalty.
That, my friend, means that you will have close to 40% of your investment going into the taxman’s pockets. Sadly, there is no recovering those funds once they leave your gold IRA.
Can it get worse than that? Oh, yes, it can? Breaking one of the regulations put in place by the IRS is akin to opening a can of worms. The IRS will send its tax mercenaries to help you put your finances in order, and I can guarantee you that this single move may lead to tears – premium tears.
You may end up paying more penalties, and possibly end up liquidating your gold assets anyway, leading to the loss of the financial safety that you sought in the first place.
The IRS has the option to loosen the regulations pertaining to opening home storage gold IRAs, but it decisively avoided this, by ensuring that gold IRAs are overseen by qualified custodians and that all gold assets are stored in IRS-approved depositories.
I Managed to Open a Home Storage Gold IRA Anyway, What Next?
First of all, congratulations on bypassing the hurdles set by the IRS. Hopefully, you have put in place all the necessary administrative structures to ensure that you are compliant. The one thing that will be a major concern, however, is the safety of your gold coins and bars.
With a net worth of over $250,000, and the financial capacity to meet all administrative costs, my assumption is that your gold IRA will be worth a large amount of money. What security measures will you put in place that will possibly surpass the peace of mind that an IRS-approved depository has to offer?
The possibility of a thief accessing the safe with the gold bars and coins in your home may be quite low, but the relative safety of your assets in such a setting pales in comparison with what an authorized and insured depository has to offer.
IRS-approved depositories are required to meet very strict requirements and safety standards and are mostly world-class facilities.
Does storing the precious metals in such a structure mean that they will touch the depository’s balance sheet? No! Fortunately enough, the storage of IRA gold in such facilities is protected from government entities and any trouble that may befall the facility itself.
Frequently Asked Questions on “What is a Home Storage Gold IRA?”
1. Is a Home Storage Gold IRA legal?
Yes, it is. You may, however, want to tread very carefully when opening one, since it calls for one to meet very strict qualifications set by the IRS. There are a couple of technical, legal, and administrative requirements that you need to attend to before you can comfortably say that you have a functional home storage gold IRA. It is generally way easier to open a gold IRA with depository storage and to work with a custodian since it takes the compliance burden off your back.
2. How does a home storage gold IRA work?
Gold investors who are interested in holding their gold at home are required to establish a gold IRA with checkbook control. This structure gives the investor more control over their account and essentially places them in charge of all the administrative duties for their IRA. You will then proceed to prove to the IRS that you have what it takes to store your physical gold at home. This you can achieve with the help of a reliable custodian or gold IRA expert, who can hold your hand as you attempt to achieve your objectives.
3. What type of precious metals can I hold in a home storage gold IRA?
The Internal Revenue Service (IRS) Code 408(m) specifies the type of physical gold coins and bars that an investor can hold in their account. The rules regarding the purity and weight of the assets held in a home storage gold IRA are similar to those pertaining to assets held in a gold IRA that has depository storage.
4. Which type of retirement account can I transfer or roll over into a home storage gold IRA?
Most types of retirement plans are eligible for conversion to a home storage gold IRA. You can contact a gold IRA specialist to establish whether you can do a rollover if you have a Traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA, 401 (k), 403(b), TSP, Annuities, etc.
That’s it for today’s article on what a home storage gold IRA is about. I hope you found it enlightening and that you now know whether such an account is worth opening. If you have more questions pertaining to this type of IRA, then you can drop them in the comments section and I will get back to you ASAP. If you’re a home storage gold IRA owner, you can share your experience to let us know whether we have the right or wrong perception of this investment structure.
I wish you well,
Eric, Investor and Team Member at Gold Retired!
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