Beyond Bitcoin: IRA LLC for Cryptocurrency
n October of last year, we noted that 2017 was a watershed year for Bitcoin and a handful of cryptocurrencies. As we roll into 2018, virtual currency assets are exploding in value, and the asset class continues to draw the interest of self-directed IRA investors like nothing we have seen in the 13 years we have been in this business. We have been receiving more and more calls each week on the topic, and have been working hard to become well versed in this fast-evolving space. Of course, being able to shelter significant gains from cryptocurrency growth in a tax-sheltered IRA has real appeal.
We have learned a few key things and wanted to share that knowledge with our readers.
- There are not many easy ways to get IRA or Solo 401(k) money into cryptocurrency investing.
- The “turnkey” crypto-currency IRA programs available are exactly that – turnkey – as well as very secure… but, they come at a high cost and provide very limited investment options with slow response times.
- The Checkbook IRA LLC or Solo 401(k) platform really is the best, most flexible and most cost-effective way to pursue a cryptocurrency investment strategy.
- It is very easy for self-directed IRA providers to say “Yes, your IRA can invest in cryptocurrencies.” It is an altogether different thing to be able to provide meaningful assistance to clients wanting to set up a cryptocurrency exchange account and start investing.
Limited Options for Cryptocurrency in an IRA
Establishing a cryptocurrency trading account in a retirement plan umbrella is just not easy. No mainstream brokerages offer direct cryptocurrency investment options. You can’t just move money from your current IRA or 401(k) onto a cryptocurrency exchange.
There are a few firms offering specialty Bitcoin IRA or Crypto IRA programs, but they are expensive and inflexible. These programs have the advantage of being simple to navigate, relatively quick to implement, and providing robust security. However, this option requires the use of a 3rd party broker, generally with pretty steep commissions on each trade, as high as 15%. Only a handful of the top virtual currencies are available. The robust security and broker layers also mean that initiating a buy/sell transaction can be a 2-4-day process.
For novice investors without the technical savvy to establish their own cryptocurrency exchange accounts, and/or for those with a long-term buy and hold view, these trade-offs can be well worth it, especially with respect to ensuring compliance and strong security features. For investors who want to take advantage of the inherent volatility in the crypto space and trade more frequently, however, these plans just won’t get the job done.
The Checkbook IRA Advantage
For true control and flexibility, an IRA LLC or Solo 401(k) is the way to go.
With such plans, you can:
- Open trading accounts with one or more cryptocurrency exchanges of your choosing
- Invest in a full range of cryptocurrencies, not just the top 3 or 4 tokens
- Secure your currency holdings with the wallet you prefer
- Initiate trades on-demand in real-time, without 3rd party paperwork, delays or commissions
This is possible because of the checkbook control these structures provide. Since the retirement plan assets are held in a legal entity that you control – LLC for the IRA, trust for the 401(k) –you can directly manage all aspects of your IRA cryptocurrency investing.
The Challenge of Cryptocurrency Exchanges
Even with a self-directed retirement plan that allows for such flexibility, the path to getting your IRA or 401(k) invested into Bitcoin, Etherium, Ripple, Tron or Monero is not quick or easy. Frankly, the main problem is simply the extreme popularity of this new investment avenue, and the fact that the cryptocurrency exchanges are overwhelmed with new account applications.
The first thing you need to understand is that this is an entirely web-based space, and customer service is not a human being on the other end of a phone call. An email response within 24-72 hours is the norm. You need to be pretty tech-savvy and self-sufficient to get from “I have a self-directed plan” to actually investing that plan. You also need to have patience. It is not uncommon for onboarding verification of new accounts with cryptocurrency exchanges to take several days or even longer.
As our team here at Safeguard has worked with clients wanting to invest in digital currencies, we have not only fielded questions about how to fill out applications and provide the necessary supporting documents, we have actually gone through the process ourselves. We’ve opened our own accounts at several of the leading exchanges. We’ve also failed to open accounts when the exchange website is overloaded for 3+ days running. It is what it is. Starting with realistic expectations is just something you have to do.
Where to Start
In order to ensure compliance and get IRA or 401(k) capital into a position to invest in digital currencies, you need to start with a mainstream exchange capable of accepting deposits in US dollars and licensed to provide services in your state. Coinbase, or their GDAX institutional platform is the largest US based exchange and probably the most reliable in terms of being able to establish an account. Gemini is a very compliance-focused exchange based in New York with good institutional services. Kraken is a viable alternative, but the website has been in degraded capacity for some time due to high demand and establishing new accounts is hit or miss.
Be prepared to submit your own personal identification as well as documentation for your IRA owned LLC or 401(k) trust. The account you establish must be an institutional account in the name of the plan, not an individual account in your name. When establishing such an institutional account, privacy is not really an option.
Expect anywhere from a few hours to several days or even longer for account verification. The timeline certainly varies based on current market conditions and the demand for new accounts at any given time.
Once the account is in place, you will need to fund it from your IRA-owned LLC or Solo 401(k) bank account. Direct draft via ACH/wire is generally the best option, though you can expect an additional 3-5-day delay. Some exchanges will accept funding via debit card. This can be faster, but also expensive. Be sure to read the fine print.
Use a Secure Wallet
For small amounts of cryptocurrency holdings or when you expect to be engaging in frequent trading, holding your currencies in an exchange provided hot-wallet can be acceptable. Because such wallets are connected to the internet, however, there is a risk of theft via hacking.
Using a secure web-based multi-key wallet, or a physical wallet such as a Trezor or Ledger Nano will be a better, more secure option if you plan to hold any significant value of currencies, or simply plan to hold a certain value for a longer time period. A physical wallet can also be helpful if you plan to do crypto-to-crypto exchanges.
Please keep in mind that any wallet – physical or cloud-based – must be held in the name of the IRA or 401(k) plan, paid for with plan funds, and used exclusively for plan coin holdings. You should not mix personal and plan coins on the same wallet, or use a personally purchased wallet to hold plan coins.
Expanding Beyond Bitcoin
The primary exchanges that can offer institutional accounts for US based LLC and trust entities are generally going to be limited to the top cryptocurrency tokens such as Bitcoin, Bitcoin Cash, Etherium and Litecoin. If you want to invest in a broader array of currencies such as Ripple, Dash or Neo, you will need to use a two-hop method.
Several services such as Changelly or Shapeshift are not capable of handling US Dollars, but they can do direct crypto-to-crypto exchanges. Once you have obtained a mainstream cryptocurrency such as Bitcoin or Etherium using your primary exchange, you can use one of these tools to trade that currency for a wide array of alternative coins. You will need a wallet address to use these platforms, so having a hardware wallet will be the most efficient option.
Invest with Care
While virtual currencies are certainly experiencing phenomenal growth, there are plenty of risks associated with this kind of investing. The regulatory environment is nascent or non-existent in many cases. One needs to be mindful of the risk of total loss of their investment though market volatility or even the hacking of an exchange. Due to the high levels of uncertainty, volatility, and risk, we suggest you not invest any capital you are not wailing to lose.
*Please be advised that Safeguard Advisors does not make specific investment recommendations or provide investment advice. Safeguard Advisors has no direct affiliation with any providers of cryptocurrency exchanges or services and does not represent or specifically recommend any particular cryptocurrency service providers. Any references provided in this article are purely educational in nature.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
