Investors are given the opportunity to choose investment assets like stocks, bonds, real estate, mutual funds and many more in self directed IRA accounts. The main job of IRA custodians is to process all transactions done to your account in your behalf. This includes filing required paper works and distributing account statements. Nonetheless, prohibited transactions are not normally known by investors giving them more reasons to be prone to tax penalties. What are prohibited and non-prohibited transactions in self directed IRA accounts? Let’s discuss this briefly, an introduction to IRAs for dummies as they call it.

You must invest in assets that are strictly accepted by the Internal Revenue Service or IRS. There are only two types of investment assets disallowed in self directed IRA accounts which are life insurances and collectibles. Since these two do not provide cash flow, they are considered non-negotiable financial instruments.

Some purchases of investments are also not allowed in this plan. An example of an invalid purchase is when you buy a certain property and turn it into a residential self directed IRA services home. Since this is deemed as self-dealing, it is restricted in a self directed IRA. Likewise, any disqualified parties who would benefit from the use of property are subjected to tax penalties.

The disqualified parties in self directed accounts are as follows:

· The IRA account holder and his/her spouse
· Lineal descendants (including their spouses) of the account holder
· The account holder’s lineal ascendants
· Anyone who administers an IRA (custodians or trustees)
· 50% ownership of account holders to an entity

Some investors misinterpret common prohibited transactions as well. The following factors must be avoided:

· Taking out loans from the self directed IRA
· Making use of the self directed IRA to grant a loan
· Selling assets to the self directed IRA
· Buying properties for personal advantages
· Buying assets from disqualified parties
· Having a loan agreement with disqualified parties

In addition to this, you may get more facts about this plan by reading books such as IRAs for Dummies. Anyway, the rules for withdrawals in IRA self directed IRA services states that early distributions must not be done. Otherwise, the self directed IRA accounts would have 10% tax penalties. However, the IRS exempts early distributions for the following reasons:

· The IRA owner becomes disabled
· Death of the IRA owner
· Fees for higher education
· Fees for first time home purchase
· Payments for refundable medical expenses
· Fees for bonuses on medical insurance
· Payments for IRS assessment

Before taking part in retirement plans, being prepared enough would definitely guide in decision making especially in IRAs. Technically, these are not IRAs for dummies but you must be familiar with these factors to stay away from restricted activities. These are not the only information you must understand. Be reminded of the prohibited transactions, disqualified persons and entities, as well as certain rules and regulations. You may encounter complicated events once you enter the world of retirement plans. Asking help from your IRA custodian or trustee would give you more possible options as there are a lot of twists and turns in these IRA accounts. self directed IRA services