Ask the IRA Expert: Can I Pay Myself a Salary with IRA Funds?

By John Bowens0 Comments

Question:

Can I start my own business with self-directed IRA funds and use those funds to pay myself a salary?

-Mike M.
 
Answer:

Mike,

As you explore all the possibilities for alternative investments, remember to keep in mind the purpose of an IRA; accumulating and growing savings for retirement.  The IRS Internal Revenue Code (IRC) 4975 details what activities are considered prohibited transactions in order to protect IRA funds from premature use.

Since your IRA is designed to provide for your future, there are taxes and penalties that discourage individuals from personally benefiting from the funds.  Paying yourself a salary from your retirement funds goes against IRC 4975 and will result in taxes and penalties.     
Below is a listing of prohibited transactions as outlined under IRC 4975:
  • The sale, exchange, or leasing of any property between a plan and a disqualified person.
  • Lending of money or an extension of credit between a plan and a disqualified person.
  • Furnishing of goods, services, or facilities between a plan and a disqualified person.
  • Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan.
  • The act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan for his own interests or account.
  • The receipt by a fiduciary of any consideration for his own personal account from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.
 
Thanks for your question!
John Bowens

 
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