Don’t listen to bad advice concerning your Roth IRA or you could wind up in a world of hurt
There are some new items on this year’s IRS “Dirty Dozen” Tax Scams for 2007 and one of them concerns the popular Roth IRA. A “Roth” IRAs is an IRA that allows for tax-free withdrawals as long as the contributions remain in the account for five years, and the account holder meets on e the of the following: age 59 1/2, death, disability or first-time home purchase.
There’s nothing fishy about Roth IRAs in general. For many a Roth IRA is the only way to fly and, when the rules are followed, the IRS has no problem with them. This year the IRS has seen enough cases of Roth IRA fraud to put it on the Dirty Dozen list. This is what they had to say:
Abusive Roth IRAs:
If your tax adviser recommends shifting under-valued property to a Roth Individual Retirement Account (IRA), then it’s time to get a new advisor. One example of abuse has a consultant telling a taxpayer to shift under-valued common stock to a Roth IRA. This allows the taxpayer to get around the annual maximum contribution limit, causing income that normally would have been taxed to go untaxed.
Don’t listen to bad tax advice!
People selling this kind of idea don’t have a lot at stake themselves. They’re just peddling books and investment programs. Identifying the ones that could land you in hot water is your job. When you file your taxes you sign on the line and take responsibility for what you’re sending the IRS. You can’t blame the shyster that sold you on the idea in the first place.
Before trying something like this ask a friend who you respect and trust or a professional accountant. Getting bad tax advice is a classic. Don’t become someone else’s cautionary tale.