Retire Safe & Tax Free - IRA News

People often ask about the roles that government plays in the IRA Rules.

department of the treasury

For those not deeply familiar with IRA's, this may sound a little odd. After all, what does the government have to do with retirement accounts anyhow?

The reality of the situation, however, is that many federal and state organizations and entities have some sort of control, power or determination as to how IRA's are treated. Below is a brief list of some of these entities, but to be sure, this list is far from exhaustive.


Congress is the primary entities responsible for creating the federal laws that govern IRA's. These laws include everything from who has oversight over those helping individuals with their IRA's to how IRA's are taxed and at what amounts to who has to take required minimum distributions and how large those distributions must be. If you are unhappy with any of the rules for IRA's, or think they are a bit too complex, chances are it will take congressional action to make a change. On the other hand, if you happen to love the IRA rules and think they are just “oh-so-easy� to understand, you have Congress to thank.

The Department of Labor

The Department of Labor is actually the government entity responsible for determining what is, and what is not, a prohibited transaction. Under the tax code, there are some things you simply cannot do with your retirement account, and these are known as prohibited transactions. Needless to say, prohibited transactions are a really bad thing. The entire IRA in which the prohibited transaction occurred is treated as having been distributed on January 1st. of the year the transaction occurred, even if the prohibited transaction only involved a mere fraction of the account. That could lead to a significant tax bill as well as the 10% penalty for those under 591/2 at the time.

Treasury Department / IRS

Treasury Department / IRS: The Internal Revenue Service is a branch of the federal Treasury Department. IRA's are affected by the IRS since it is the government body responsible for calculating and collecting your taxes. The IRS also serves another important function. Although Congress writes the laws that govern IRA's, it is the IRS that is responsible for writing the regulations which explain those laws and issuing other guidance, such as notices, announcements and revenue rulings, that help clarify those rules and allow us to better understand how the laws work.

Individual States

Individual States: States actually have a lot of say over IRA's for a variety of reasons and different state organizations are responsible for different aspects. For instance, it is up to each individual state to determine how much, if at all, they will tax IRA distributions. Similarly, it's up to each individual state to determine if they will allow IRA deductions for the IRA contributions on their state's income tax return.

States also have control with a variety of other IRA related issues. For instance, state law determines whether or not IRA's receive creditor protection. States also generally have control over property law, so when you leave your IRA to certain beneficiaries, state law could have some say as to how those assets are passed. In addition, state laws cover when minor beneficiaries reach the age of majority and have control over certain inherited assets.

Please call me today if you have questions about your IRA. I look forward to hearing from you!

Contact: Marc H. Weiss, Archer Weiss Insurance and Financial Services

(818) 610-8560