IRS Ties Hands of IRA Owners
IRA rollovers hands tied by IRS
IRA owners must now pay custodial fees to move their retirement funds.

As owners of an Individual Retirement Account (IRA) we have always been able to move our retirement funds wherever the highest rates were offered, a recent tax court ruling changed all of that. Unless you pay a custodial fee to your IRA custodian to make the changes for you.

US Tax Court ruling said IRA owners are only allowed one transfer per year without exposure to tax liability. Why has the tax court adopted such a rule? By tying our hands with possible tax liability, we can no longer have control over our retirement funds as a "do it yourself" approach.

The actual ruling was meant to handcuff individuals who are and have always been allowed to move their own IRA. What is the difference between an individual and the custodian who handles the IRA account? To me there is none. The issue at heart is the reporting, a custodian reports immediately and an individual moving qualified funds must only do it at tax time. The tax court must have been far too concerned of having qualified funds slip through the cracks.

The decision in tax court changes the interpretation once widely held by IRA owners and custodians. Does this mean the interpretation could be altered again in the future? Yes and no. This court ruling was the first time this topic has been reviewed and it could mean many other "assumed" positions are also exposed.

How would your tax preparer and your custodial (IRA) management offer any other interpreted advice? The simple position is this, they can’t. The Internal Revenue Service and the tax court rulings are always subject to interpretation and changes.

What is the downside of this ruling to tax payers? With an IRA you are allowed an unlimited amount of investment opportunities. You can have as many accounts as you wish but they are still only considered one IRA. Because of this ruling, you are allowed to only be in control of one account per year. If you have funds in 10 banks qualified as an IRA, you cannot move the funds in more than one annually without using a custodial to custodial transfer. In simple words, someone is going to charge you a fee and the IRS has ruled in their favor.

Once again, the large institutional organizations have grabbed more control away from us.


This article was written by Bill Broich, and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.