Importance of Choosing an IRA-Expert Tax Accountant

Most individuals who pay for tax advice and preparation think that all CPAs/tax accountants are knowledgeable on issues relating to IRAs and 401(k)s. But this is not always the case.

The Main Issue -

The Internal Revenue Code Sections that relate to IRAs (primarily Sections 408 and 408(A) - Roth IRAs) and qualified retirement plans (primarily Section 401) are a world unto themselves and require many years of specific study and research before any level of expertise can be grasped. Most CPA/tax accountants are up to date on general issues such as the annual contribution limits, deadlines for making contributions, the basic taxability differences between a traditional IRA and a Roth IRA, etc. But there are many IRA and 401(k) issues that are very nuanced and therefore not well known by CPA/tax accountants because they're primary source of income is not specifically in the IRA & 401(k) area.

Where it gets tricky - 

There are many straightforward items when dealing with IRAs/ 401(k)s, such as setting up an account, making an annual contribution, investing in stocks, bonds and mutual funds, etc.  But there are also many items (and mistakes by account holders) that can cause unwanted taxation if not dealt with properly and many times the mistakes made can not be undone. Things like movement of funds from a company 401(k) plan to an IRA and the proper coding of the IRS Form 1099-R, required minimum distributions from an inherited Roth IRA, the 60 day IRA rule, prohibited transactions in dealing with self-directed IRAs/401(k)s, the Unrelated Business Income Tax (UBIT), etc., are all very unique issues that require your CPA/tax accountant to have years of knowledge and history in order to properly deal with retirement accounts.

Summary -

There are two main reasons to choose a CPA/tax accountant that is competent in IRAs/401(k)s: 1) to avoid unnecessary and unwanted tax liability and early distribution penalties and 2) to avoid having issues with the IRS. It is extremely important to have an experienced second set of eyes to review your retirement transactions so make sure the CPA/tax preparer has the knowledge base you need to deal with the types of retirement issues you may have.