Individuals may generally transfer IRA or rollover eligible qualified retirement plan assets into a self-directed IRA LLC structure. Individuals may also roll over after-tax retirement funds to a Roth Self-Directed IRA.
What is the most Common Way to Fund a Self-Directed IRA?
Transfers and rollovers are types of transactions that allow movements of assets between like IRAs – Traditional IRA to Traditional IRA, including Traditional IRAs that contain simplified employee pension (SEP) contributions. A SEP IRA transfer is the most common method of funding a Self-Directed IRA LLC or Self-Directed Roth IRA.
SEP IRA Transfers to a Self-Directed IRA
A Traditional IRA to Traditional IRA, including Traditional IRAs that contain SEP contributions, transfer is one of the most common methods of moving assets from one IRA to another. A transfer usually occurs between two separate financial organizations, but a transfer may also occur between IRAs held at the same organization. If an IRA transfer is handled correctly the transfer is neither taxable nor reportable to the IRS. With an IRA transfer, the IRA holder directs the transfer, but does not actually receive the IRA assets. Instead, the transaction in completed by the distributing and receiving financial institutions. In sum, in order for the IRA transfer to be tax-free and penalty-free, the IRA holder must not receive the IRA funds in a transfer. Rather, the check must be made payable to the new IRA custodian. Also, there is no reporting or withholding to the IRS on an IRA transfer.
The tax attorneys at the IRA Financial Group will assist you fund your Self-Directed IRA LLC by transferring your current SEP IRA funds to your new Self-Directed IRA structure tax-free and penalty-free.
How the SEP IRA to Self-Directed IRA Transfer Works?
Your assigned tax attorney and paralegal will work with you to establish a new Self-Directed IRA account at a new FDIC and IRS approved IRA custodian. The new custodian will then, with your consent, request the transfer of your SEP IRA assets from your existing IRA custodian in a tax-free and penalty-free IRA transfer. Once the IRA funds are either transferred by wire or check tax-free to the new IRA custodian, the new custodian will be able to invest the IRA assets into the new IRA LLC “checkbook control” structure. Once the funds have been transferred to the new IRA LLC, you, as manager of the IRA LLC, you would have “checkbook control” over your retirement funds so you can make traditional as well as non-traditional investments tax-free and penalty-free.
60-Day Rollover Rule
An individual generally has sixty (60) days from receipt of the eligible rollover distribution from a SEP IRA account to roll the funds into a Self-Directed IRA LLC structure. The 60-day period starts the day after the individual receives the distribution. Usually, no exceptions apply to the 60-day time period. However, in cases where the 60-day period expires on a Saturday, Sunday, or legal holiday, the individual may execute the rollover on the following business day.
An individual receiving an eligible rollover distribution may rollover the entire amount received or any portion of the amount received. The amount of the eligible rollover distribution that is not rolled over to an IRA is generally included in the individual’s gross income and could be subject to a 10% early distribution penalty if the individual is under the age of 591/2.
How the 60-Day Rollover Works with a Self-Directed IRA
The tax attorneys at the IRA Financial Group will assist you in rolling over your 60-day eligible rollover distribution to a new FDIC and IRS approved IRA custodian. Once the 60-day eligible rollover distribution has been deposited with the new IRA custodian within the 60-day period, the new custodian will be able to invest the SEP IRA assets into the new IRA LLC “checkbook control” structure. Once the SEP IRA funds have been transferred to the new IRA LLC, you, as manager of the IRA LLC, you would have “checkbook control” over your retirement funds so you can make traditional as well as non-traditional investments tax-free and penalty-free.
Self-Directed IRA Transfer Experts
The tax attorneys at the IRA Financial Group will assist you in transferring your SEP IRA tax-free and penalty-free to a “checkbook control” self-directed IRA LLC solution. Each client of the IRA Financial Group will work directly with an assigned tax attorney to establish the Self-Directed IRA LLC solution and make sure that the self-directed IRA transaction is structured in the most tax efficient manner and is not in violation of any IRS rules.
To learn more about the Self-Directed IRA transfer or direct or indirect rollover rules, please contact a tax professional at 800-472-0646.