Is the IRS Cracking Down on IRAs?

July 20, 2023

Discover the latest on the IRS crackdown on IRAs and the impact on NFTs with Arista Advice. Learn about IRS Notice 2023-27's prohibition on including NFTs associated with collectibles in your IRA, potential tax implications, and how it could affect the value of your assets. Stay informed and manage your IRA wisely. For more financial insights and resources, visit follow us on our YouTube channel for expert guidance on wealth management and financial planning. Your financial future matters, and we're here to help you navigate it.


Full Transcript:

Hello, welcome to Arista Advice. Question of the week is: "Paul, is the IRS cracking down on IRAs?" The answer is yes, but let's talk about it.

As you'll remember, three, four years NFTs popped up. Digital images popped up. They were sold crazy. The Internal Revenue Services has come to the conclusion that the prevalence of NFTs, what are NFTs? Non-fungible tokens, have been owned and purchased in IRAs. That's not good thing.

The IRS sent notice 2023-27 has stated that the investment of NFTs that are associated with collectibles into an IRA is prohibited. That's not a good thing if you have an IRA and you have non-fungible tokens inside. The IRS, as a result of this policy, have notified unsuspecting IRA owners may be subject to sizable taxes and even potential penalties. Whenever a traditional IRA has a collectible asset in it, it can disqualify the value of that collectible and push that asset out of the IRA, subject it to a 10% penalty, and subject it to ordinary income, which is not a good thing when you put those two things together. You can almost sometimes lose over half of the value of that asset.

So owners need to be aware that right now, with notice 2023-27, that you cannot, should not ever consider having collectibles of NFTs inside your IRA, which is a qualified asset. So in summary - always be alert of what's going on and what you own inside your IRA. In 2023-27, the IRS has given notice that you can't have NFTs inside qualified retirement plans. It will subject that asset to being fully taxable and paying a 10% penalty, if you have that asset in it, and you're not 59 and a half yet. 

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