Oct 26

Here’s What You Need to Know About the 2018 IRA Contribution Limits

Last week, the IRS announced the new limits for retirement plans for 2018.  Here’s what you need to know about your IRA Contributions –

2018 IRA (including Self-Directed IRAs) Contribution Limit – Limits remain the same as 2017.  For individuals under age 50, the limit is $5,500.  For those 50 and older, you can make an additional $1,000 catch-up contribution, bringing the total limit to $6,500.

Here's What You Need to Know About the 2018 IRA Contribution Limits2018 Deductible IRA Phase-outs – If you participate in en employer-sponsored plan (such as a 401(k) plan), there are income restrictions for a deduction.  If you are single or head-of-household, you can get a full deduction if your adjusted gross income (AGI) is $63,000 or less.  It phases out until an AGI of $73,000.  An AGI above that means you cannot deduct your IRA contribution for the year.  If you are married filing jointly, you receive a full deduction if your AGI is $101,000 or less.  This phases out until an AGI of $121,000.  If you are married filing jointly and your spouse participates in an employer’s plan, the phase-out starts at $189,000 and you are not eligible for a deduction if your AGI is above $199,000.

2018 Roth IRA (including Self-Directed Roth IRAs) Contribution Limit – Again, these are the same as last year (and the same amount as traditional plans).  $5,500 if you are under age 50 and $6,500 if you are age 50+.

2018 Roth IRA Income Limits – You may only contribute directly to a Roth IRA if you are below the income limits.  If you are single or head-of-household, you may make a full contribution if your AGI is less than $120,000.  Your contribution limit phases out until $135,000, in which you may not contribute to a Roth directly.  If you are married filing jointly, an AGI of less than $189,000 allows for a full contribution.  This amount phases out until it reaches $199,000.

Note: You must have earned income in the year(s) in which you wish to contribute to an IRA.  The amount you may contribute is the lesser of the annual limit or your earned income for the year.

SEP IRA – Contribution limit increases $1,000 to $55,000 for 2018.

SIMPLE IRA – The limit remains the same as 2017 at $12,500 with a $3,000 catch-up for those age 50 and up.

For more information about the IRA Contribution limits, please contact us @ 800.472.0646.

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Oct 19

Factors To Consider When Contemplating A ‘Backdoor’ Roth IRA

The following article, written by Adam Bergman, originally appeared on Forbes.com –

There have been no income level restrictions for making Roth IRA conversions since 2010, hence a high income earner can do a conversion of after-tax (non-deductible) IRA funds to a Roth IRA, which is known as a ‘backdoor’ Roth IRA. In other words, the ‘backdoor’ IRA allows a high- income earner, who has exceeded the Roth IRA annual income contribution limits, to circumvent those rules and make a Roth IRA contribution. However, as detailed below, a tax could be due on the conversion under the pro rata (aggregation) rules if the IRA holder has other traditional pre-tax IRAs that have not been taxed. In general, the taxes owed on the conversion will depend on the ratio of IRA assets that have been taxed to those that have not, making the ‘backdoor’ IRA unattractive for some.

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A regular contribution to a Roth IRA is generally limited to the lesser of the annual contribution limit or 100 percent of the individual’s compensation. The Roth IRA contribution limit is the same as the traditional IRA limit. For the year 2017, the annual contribution limit for an individual under the age of 50 is $5,500, and $6,500 for an individual over the age of 50.

An individual making Roth IRA contributions must reduce those contributions by the amount of any contributions made to a traditional IRA.  However, not all individual taxpayers are eligible to make Roth IRA contributions.  For taxpayer’s filing as single, one must have a modified adjusted gross income under $133,000 to contribute to a Roth IRA for the 2017 tax year, but contributions are reduced starting at $118,000.  Taxpayers filing as married, the combined modified adjusted gross income must be less than $196,000, with reductions beginning at $186,000.

Before considering a “backdoor” Roth IRA strategy, there are a number of important items to consider.  The first is the concept of the IRA pro rata aggregation rules.  Under Internal Revenue Code Section 408(d)(2), the aggregation rules hold that when an individual has multiple pre-tax IRAs, they will all be treated as one account when determining the tax consequences of any distributions (including a distribution out of the account for a Roth conversion). In other words, the aggregation rules can cause issues for individuals looking to take advantage of the ‘backdoor’ Roth IRA strategy that have multiple IRA accounts.

For example, Amy has $100,000 of existing pre-tax IRA assets across multiple IRA accounts. Amy now makes over $200,000 so is not eligible to make a Roth IRA contribution for this year. Amy wishes to make a $5,500 Roth IRA contribution by taking advantage of the ‘backdoor’ Roth IRA strategy, which involves making a non-deductible IRA contribution and then converting those funds into a Roth IRA.  However, since Amy has $100,000 of pre-tax IRA funds prior to the Roth IRA conversion, the aggregation rules will limit how much Amy can convert to a Roth IRA.

If Amy attempted to do a $5,500 Roth conversion (from combined IRA funds that now total $100,000 plus new $5,500 contribution equals $105,500), the return-of-after-tax portion will be only $5,500 / 105,500 = 5.2%. Which means the net result of his $5,500 Roth conversion will be $286 of after-tax funds that are converted, $5,214 of the conversion will be taxable, and she will end out with a $5,500 Roth IRA and $100,000 of pre-tax IRAs that still have $5,214 of related after-tax contributions. Hence, the net result of the IRA pro rata attribution rules is that a large portion of the after-tax funds linked with the new after-tax IRA contribution will not end up in the Roth IRA and will instead be connected with the existing pre-tax IRA funds.

Based on the example, the IRA attribution rules significantly limited the tax benefit of the ‘backdoor” Roth strategy for Amy as only a very small amount of the $5,500 after-tax funds were able to be converted tax-free to the Roth IRA. In addition, the IRA attribution rules only apply to pre-tax IRAs of the taxpayer, not his or her spouse, inherited IRAs, or any employer retirement plans (i.e. 401(k)), which can offer some interesting tax planning opportunities.

In addition to being mindful of the IRA attribution rules when considering a ‘backdoor’ Roth IRA conversion, one must also consider the step-transaction-doctrine. The step-transaction doctrine, which arose from a Supreme Court case, holds that a court can invalidate a transaction if the separate steps involved in the transaction have no independent substantial business purpose. In the context of the ‘backdoor’ Roth IRA strategy, the thinking goes that if the separate steps of the non-deductible IRA contribution and subsequent Roth conversion are done too quickly or simultaneously there is some risk the IRS could attempt to invoke the step-transaction doctrine in order to invalidate the Roth conversion.

There is no court precedent for this position, but many tax experts believe it would be wise to wait some time in between the nondeductible IRA contribution and the subsequent Roth conversion. There is also no firm rule for how long one should wait after the nondeductible contribution is made before making the Roth IRA conversion, but waiting a few months and having the IRA funds invested during the waiting period is thought to be sufficient.

Since 2010, the ‘backdoor’ Roth IRA strategy has been viewed as an attractive way for many high income earners to take advantage of the power of the Roth IRA.  Below are some tips to consider before doing a ‘backdoor’ Roth IRA:

  • Understand the Roth IRA contribution income limits for the taxable year in question
  • Determine whether you have any existing pre-tax IRA funds. If so, understanding the IRA attribution rules under Internal Revenue Code Section 408(d) is crucial
  • Are you currently participating in an employer retirement plan? If so, rolling over existing pre-tax IRA funds to an employer plan may help you circumvent the IRA attribution rules.
  • Be mindful of the step-transaction doctrine and consider waiting at least several months between the non-deductible contribution and the Roth IRA conversion
  • Consider not documenting that you are doing a ‘backdoor’ Roth IRA strategy.

It is unclear how long the ‘backdoor’ Roth IRA strategy will continue to be permitted. President Obama’s 2016 budget recommendations did attempt to end it, but the recommendation did not become law.  It is unclear what the Trump Administration’s position is with respect to it.  However, for now, the ‘backdoor’ IRA strategy continues to be a very popular way for high income earners to make Roth IRA contributions.

For more information about the ‘Backdoor’ Roth IRA, please contact us @ 800.472.0646.

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Oct 17

What are the minimum distribution requirements of an IRA?

The terms of an independent retirement account or annuity must include several minimum distribution rules, which Congress imposed to ensure that IRAs are primarily used as retirement savings media, not as vehicles to build wealth for transmission to heirs. As discussed below, these rules provide separately for distributions to IRA owners and distributions to beneficiaries after the death of an IRA owner. An IRA owner is an individual who establishes and contributes to an IRA for the benefit of himself or herself and his or her beneficiaries.

What are the minimum distribution requirements of an IRA?Minimum distributions to IRA owners

An IRA must, by its terms, require the account or annuity to be fully distributed not later than April 1 of the year following the calendar year during which the IRA owner attains age 70 and 1/2 or be distributed by annual or more frequent payments over a period beginning by that date and continuing not longer than for the owner’s life, the lives of the owner and his or her beneficiary, or a period not longer than the life expectancy of the owner or the owner and beneficiary. April 1 of the year following the calendar year during which the owner reaches age 70 and 1/2 is the required beginning date.

Note: there are no required minimum distributions for a Roth IRA

Please contact one of our IRA Experts at 800-472-0646 for more information.

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Oct 12

IRA Financial Group – Leading Self-Directed IRA Provider – Introduces New Cryptocurrency Forum for Self-Directed IRA Clients

Bitcoin IRA forum for IRA Financial Group clients will allow clients to share information and tips on all matters involving cryptocurrency investing with IRA funds

IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) Plan solution is proud to announce the introduction of a new cryptocurrency forum for all IRA Financial Group clients who can share information, tips, recommendations, and review of all matters involving the use of self-directed IRA and Solo 401(k) plans to make cryptocurrency investments, such as bitcoins. “We have received a tremendous amount of feedback from clients looking for a way to communicate with our clients and discuss matters involving using retirement funds to buy cryptocurrencies, such as bitcoins,” stated Adam Bergman, a partner with the IRA Financial Group.

IRA Financial Group’s Bitcoin IRA solution with checkbook control will allow retirement account holders to buy, sell, or hold Bitcoins and other cryptocurrency assets and generate tax-deferred or tax-free gains, in the case of a Roth IRA.

The primary advantage of using a Self Directed IRA LLC to make Bitcoin investments is that all income and gains associated with the IRA investment grow tax-deferred or tax-free in the case of a Roth IRA.

IRA Financial Group’s Bitcoin IRA LLC for cryptocurrency investors, is an IRS approved structure that allows one to use their retirement funds to make Bitcoin and other investments tax-free and without custodian consent.

IRA Financial Group is the market’s leading provider of self-directed retirement plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

The IRA Financial Trust Company, a self-directed IRA custodian, was founded by Adam Bergman, a partner with the IRA Financial Group.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Oct 10

New Podcast – The Trump Tax Plan and Your Retirement Account

IRA Financial Group’s Adam Bergman discusses the new tax plan announced by President Trump and the implications it has for retirement account holders.

 

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Click Here to Listen

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Oct 05

What Are the Advantages of Using IRA Financial Group’s Business Acquisition Solution?

There are many advantages of using IRA Financial Group’s Business Acquisition & Compliance Solution Structure (BACSS), also known as ROBS, when using your IRA funds to start a business:

Tax Advantages: With the BACSS you have the ability to use your retirement funds to acquire a new business or grow an existing business tax-free!

Start or Grow a Business Tax-Free: With BACSS, you can access your retirement funds to start or grow a business tax free and without penalty!

Access Funds without Penalties: Accessing your retirement funds can prove expensive if not structured properly. Distributions before retirement age can cost you up to 45% in taxes and penalties. With BACSS, you can access your retirement funds to start or grow a business tax-free and without penalty!

Acquire or Build a Business with No Debt: With BACSS, you can start or grow a business without ever borrowing a penny or touching the home equity you worked so hard to build.

What Are the Advantages of Using IRA Financial Group's Business Acquisition Solution?Control your Future: With BACSS, you will be in control of your retirement funds. BACSS is designed to make you the trustee of the plan giving you “Checkbook Control” over your retirement funds. As trustee of the plan you will have the ability to invest your funds to acquire or grow a business tax-free and without penalty!

Compliance with IRS and ERISA Rules: BACSS was designed as an IRS and ERISA compliant structure for using retirement funds to acquire or invest in a business tax-free! The IRA Financial Group’s in-house retirement tax professionals spent the last two years carefully studying IRS guidance in order to design an IRS and ERISA compliant structure for using retirement funds to acquire or invest in a business tax-free! Unlike our competitors who have been offering this type of structure for many years, prior to receiving guidance from the IRS and with a significant portion of their activity having been found to be non-compliant, the IRA Financial Group has patiently waited for clear IRS guidance before offering a structure that would be fully compliant with IRS and ERISA rules and procedures. Because the IRS has stressed the importance of compliance when using retirement funds to purchase a business, it is crucial to work with a company that is operated by a team of in-house tax and ERISA professionals who have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP to ensure a fully compliant structure.

Speed: We have developed a process that ensures speed and compliance, by using standardized procedures that work via phone, e-mail, fax, and mail. Your funds will be ready for investment into your new or existing business within 14-21 days.

Value: With the IRA Financial Group, you will be working directly with our in-house tax and ERISA professionals to design an IRS and ERISA compliant structure that will allow you to use your retirement funds to acquire or grow a business tax-free at a fair and reasonable price.

Use your retirement funds to purchase a new business or franchise tax-free and without penalty!

It’s 100% IRS compliant!

Call us today at 800-472-0646 to learn more about how you can use your retirement funds to start a new business or grow an existing business tax-free, in full IRS compliance, and without penalties!

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Oct 03

How Do You Make an Investment with a Self-Directed IRA?

Making an investment through a Self-Directed IRA LLC can be done in a few easy steps:

1. Set up a Self-Directed IRA LLC.

With IRA Financial Group, you no longer have to spend $2,000 to $5,000 or more to set up your Self-Directed IRA LLC.

We provide the following all for one low price

  • Free tax consultation with our in-house retirement tax professionals
  • Setup your LLC in the State of your choice
  • Prepare and file the Articles of Organization with the State
  • Generate a special purpose, IRA Custodian approved Self-Directed IRA LLC Operating Agreement
  • Generate a special purpose, IRA Custodian approved Subscription Agreement, as required by the Custodian
  • Obtain the EIN from the IRS
  • Co-ordinate setup with the Custodian of your Choice
  • Free tax and IRA support regarding the Self-Directed IRA LLC Structure
  • Expedited Service Guarantee!
  • Satisfaction Guaranteed!

How Do You Make an Investments with a Self-Directed IRA?The IRA Financial Group will take care of the entire set-up of your Self-Directed IRA LLC “Checkbook Control” structure. The whole process can be handled by phone, email, fax, or mail and typically takes between 7-21 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our IRA experts and tax and ERISA professionals are on-site greatly reducing the setup time and cost. Most importantly, each client of the IRA Financial Group is assigned a tax retirement tax professionals to help with the establishment of the Self-Directed IRA LLC “Checkbook Control” structure. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

2. Transfer of Retirement Funds Tax-Free.

Our IRA Experts will assist you in transferring your retirement funds tax-free from your current custodian to a new FDIC backed/IRS approved Passive Custodian that allows for truly Self-Directed IRA investments, such as real estate, tax liens, precious metals, and much, much more.

What is a Passive Custodian?

The IRS approved and FDIC backed custodian in the “checkbook control” Self-Directed IRA LLC structure is referred to as a “passive” custodian largely because the custodian is not required to approve any IRA related investment and simply serves the passive role of satisfying IRS regulations. The passive custodian business model is built around the establishment and maintenance of IRAs, whereas, a traditional IRA custodian generates income through the marketing and sale of investment products.

All the passive custodians we work with are FDIC backed and IRS approved. Once your custodian has transferred your retirement funds to the passive custodian, the passive custodian will immediately transfer your funds to your new IRA LLC where you as manager of the LLC will have “Checkbook Control” over the funds.

With a Self-Directed IRA LLC with “checkbook control” you no longer have to pay excessive custodian fees based on account value and transaction fees. Instead, with a “checkbook control” Self-Directed IRA LLC, an FDIC backed IRS approved passive custodian is used. By using a Self-Directed IRA LLC with “checkbook control” you can take advantage of all the benefits of self-directing your retirement assets without incurring excessive custodian fees and custodian created delays.

What Type of retirement Funds May be Transferred Tax-Free?

  • Traditional IRA
  • Roth IRA
  • SEP
  • SIMPLE
  • 401(k)
  • 403(b)
  • Plans for Self-Employed (Keoghs)
  • ESOPs
  • Money Purchase Pensions Plans

Our IRA Experts will assist you in completing all the necessary custodian documents so your retirement funds are transferred to the new passive custodian quickly and without any tax.

3. Open IRA LLC Bank Account.

Open a local bank account for the LLC at any bank of your choice. You can open a bank account for your Self-Directed IRA LLC at any bank or credit union.

4. Tax-Free Transfer of Funds to LLC Bank Account.

Direct the passive custodian to transfer the IRA funds to your new Self-Directed IRA LLC bank account. The IRA LLC checking account can be opened at any bank or credit union.

5. “Checkbook Control”.

As the Manager of the Self-Directed IRA LLC, you will have the freedom to make all investment decisions for your Self-Directed IRA LLC. In other words, you will have “checkbook control” over your IRA funds allowing you to make an IRA investment by simply writing a check or wiring funds directly from the IRA LLC bank account.

6. Tax-Free Investing.

Since your IRA will become the owner(s) (member(s)) of the newly formed IRA LLC, all income and gains generated by an IRA LLC investment will generally flow back to your IRA tax-free. Because an LLC is treated as a pass-through entity for federal income tax purposes, all income and gains are taxed at the owner level not at the entity level. However, since an IRA is a tax-exempt party pursuant to Internal Revenue Code Section 408 and, thus, does not pay federal income tax, all IRA investment income and gains will generally flow through to the IRA tax-free!

Self-Directed IRA LLC Structure

To view a diagram of the Self-Directed IRA LLC structure, please select the image below.

Self Directed IRA LLC

For more information about the Self-Directed IRA, please contact one of our IRA Experts @ 800.472.0646.

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