IRS Rules & Important Dates

Self-directed retirement accounts provide a great deal of freedom, flexibility, and a wealth of investment choices. However, these accounts have IRS rules & important dates that investors need to be aware of to maintain these benefits. The IRS mandated these rules to ensure that your retirement plan does not provide you any personal benefits until retirement. Be sure you understand these rules to keep your account in compliance. If you do not follow these rules, your plan could suffer penalties, taxation, or loss of its tax-sheltered status. You should always consult your attorney, tax, and investment professionals regarding your investment decisions.

IRS Rules & Important Dates

Prohibited Transactions

Some types of self-directed transactions violate your IRA’s basic intent. These transactions subject your account to risks and penalties. Your retirement plan is not to benefit you before you reach retirement age. Actions providing immediate financial gain to the account holder are not allowed. Actions that benefit other disqualified persons/parties are also not allowed.

Examples include:

  • Borrowing money from your IRA
  • Selling, exchanging, or leasing personally owned property to your IRA
  • Using your IRA as security for a loan
  • Transferring plan income or assets to disqualified persons
  • Lending IRA money to disqualified persons
  • Extending credit on your IRA to disqualified persons
  • Furnishing goods, services, or facilities to disqualified persons
  • Allowing fiduciaries to obtain or use the plan’s income or assets for their own interest
Prohibited Transactions Guide cover

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Disqualified parties 2020

Disqualified Persons

  • The IRA holder and his/her spouse
  • The IRA holder’s lineal descendants, ascendants, and their spouses
  • Investment advisors and managers
  • Corporations, trusts, partnerships, or estates in which the IRA holder owns a 50 percent or greater interest
  • Anyone providing services to the IRA, such as the trustee or custodian

Prohibited Investment Types

Your self-directed IRA may NOT invest in life insurance products or collectibles. Examples of collectibles include works of art, rugs, antiques, and alcoholic beverages. Your IRA may invest in precious metals, but the metals must be approved. Approved metals must meet certain fineness requirements.

2021 Important Dates

April 15, 2021 – Deadline to open and fund traditional and Roth IRAs, ESAs, and HSAs for your contribution to be deductible on your 2020 tax return filed by April 15, 2021.

Note: SEP IRAs must be opened and funded by tax filing date, including extensions


Additional Resources

IRS Publication 590 – Individual Retirement Arrangements (IRAs)
Internal Revenue Code 4975 – Disqualified Persons
SEC Alert: Self-Directed IRAs and the Risk of Fraud
Contribution Limits