Why did the GAO Perform the Study?
According to the GAO, non-traditional IRA investments—such as real estate, certain precious metals, private equity, and virtual currency—can
introduce risks to IRA participants who assume greater responsibility for navigating the complex rules that govern tax-favored retirement savings.
What Does the GAO Report Examine?
- How much guidance the IRS provides for IRA participants so that they understand the IRA rules as they relate to alternative investments.
- How challenging it is for the IRS to enforce the IRA rules, especially the prohibited transaction rules.
What Resources did They Review?
GAO identified and analyzed IRS information to help taxpayers understand four compliance areas. GAO reviewed IRS analysis of nonmarket IRA assets reported by IRA custodians, and IRS audit procedures and training materials; and interviewed relevant IRS officials to identify enforcement challenges.
What does the GAO Recommend?
GAO recommends the IRS (1) update IRA Publication 560 and related publications with more information surrounding the rules for investing in alternative investments including real estate, virtual currency and IRA LLCs, (2) evaluate the feasibility of requiring disclosure for high-risk IRA asset types associated with abusive tax schemes, and (3) develop auditor resources (such as training materials or job aids) that explain how IRAs with unconventional assets can generate unrelated business income tax.
You can review the full GAO January 2020 report by CLICKING HERE.