IRA Audits: What Triggers an IRS Audit on an IRA?
John Hyre: What caused the audit? My guy won the lottery it was just a wrong one. Here’s what they’re looking for. This is again what the agent should not have told me but he did because he talked a lot. They’re looking at Roth IRAs especially. It doesn’t mean that they’re not looking at other stuff, but they’re focused on high-value Roth IRAs. His theory was, we never get paid on a Roth. Eventually, we’ll get paid on a traditional.
Self-directed, balance of $500 or more, per social security number, not per account. Even there, even though it’s a heightened audit risk, there’s so few people who know what they’re doing with this and there’s so few audits on it. We’re still not seeing a lot of audits in terms of the actual sheer number out there. We are seeing some following chaotics. They’re fewer and further between probably because they get less out of them.
Participant: A little like self-directed LLC checkbook-
John: Yes. If you look on your evaluation form at the end of the year, they ask you to fill out every year. There are three boxes among others that you can check. The LLC, real estate or trust. Those are three things that increase the chances. Understand when I say increase the chances, maybe it goes from 0.5% per year to 1% per year because they’re just so limited on what they can do. They are putting more time and effort into it. They’re starting to learn because remember it’s like a super sensitive piñata. If all you do is give it the tiniest little needle, everything comes out of the piñata and they’re figuring that out.