Self-Directed IRAs offer greater investment flexibility compared to traditional IRAs and can be a worthwhile investment. However, it is important to understand the rules and restrictions to ensure that there are no tax consequences. Here is a list of four common pitfalls of Self-Directed IRAs:
1. One common mistake with self-directed IRAs is engaging in prohibited transactions, which can lead to the loss of the IRA’s tax-exempt status.
2. Failing to report transactions and distributions accurately can lead to penalties.
3. Not providing accurate valuations of IRA assets can cause issues.
4. Misunderstanding the rules regarding what investments are permissible can lead to mistakes.
These common mistakes illustrate the importance of understanding and adhering to the rules governing self-directed IRAs to avoid common mistakes that can result in significant tax penalties. If you are interested in setting up a Self-Directed IRA, please reach out by clicking the “Contact” button on the top of the page.