How To Use Your IRA To Buy Property In Central America

A growing number of North Americans are using funds from their IRA to purchase foreign real estate. While the process may appear convoluted at first, all it involves is a few steps taken in sequence. The steps have been followed by hundreds of investors purchasing real estate in Nicaragua, Costa Rica, Panama and Belize. The same process works for 401K investments, Roth IRA and other retirement plans.

The first thing you need to do is to set up what is called a “self-directed IRA”. You’ll typically need a new custodian to do this. So either search online for a self-directed custodian or review the three main firms offering this service: Entrust, Equity Trust and Lincoln Trust.  As you decide on your custodian make sure that their program allows investment in foreign real estate.

Practically all types of real estate in Central America are eligible for purchase using the funds in your IRA. So this will include raw land, condos, multi-unit apartments or a house. The key factor to bear in mind is that the property needs to qualify as an investment rather than as a personal use purchase. But that’s only before you retire. Once you retire you can take the property as an IRA payment and live in it full-time. Many investors who are of pre-retirement age use their IRA funds to buy rental real estate as an investment with a plan on moving into the property once they retire.

Although in some countries it’s possible to buy property in the name of your IRA account, across Central America the local legal systems do not recognize these account names. The solution is to set up a corporation to own the property. Your IRA invests all of its funds in that corporation and then you as the manager of that corporation purchases the real estate that you have chosen.

Back Taxes and the Move to Settle Them

It is very much normal for people to move into the process to settle tax debt to make their records straight. With a good standing history of paying taxes, you get better chances of higher loan approvals. To settle IRS tax debt, you need to get an installment agreement with the local government unit. This contract is to act as a process of paying monthly returns to the concerned agency to pay the liabilities. Basically, the agreement is defined as an arrangement between the government and the taxpayer over a certain period of time.

The creation of this method to settle tax debt will prevent the agency from going into enforced collection actions. If the concerned taxpayer is unable to construct such an agreement plan between the agency and the taxpayer, the IRS will have the grounds to hold the accounts of the person. In some cases, the persons’ wages will also be levied until the debts are paid in full. As a matter of fact, the records of the taxpayer remain in current and updated histories. When the person is unable to meet it, then most probably, his records and bank accounts will be placed on hold. The installment agreement signifies the intent of the person concerned to pay the obligations. Interests and penalties that have been accrued will still be forced as part of the obligations to be paid.

People who want to settle tax debt can have this option as a method of making their records current. In fact, with the recent conditions of the American economy being in turmoil, the IRS will ensure that you get the best deal possible. In a sense, if you are someone who is more than willing to pay the obligations, then most likely the IRS will be a little lenient on you. The IRS is also offering taxpayers, who miss out on a payment for the installment, an opportunity to make up for it. If you want to be part of the installment program, then you would have to declare the returns that are past due. Defaults on payments will eventually be pardoned but will still be part of the total obligations of the payer.