Altcoins Talks - Cryptocurrency Forum
Further Discussions => Legality & Taxation of Cryptos => Topic started by: Cordillerabit on February 07, 2018, 06:26:01 PM
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As Americans begin to file their income taxes, regulatory officials are emphasizing caution in the wake of cryptocurrency scams seeking to prey on those investing in cryptocurrency retirement accounts. Cryptocurrency financial products, like individual retirement accounts (IRAs), became exceedingly popular in the final fiscal quarter of last year.
Specifically, the Commodities Futures Trading Commission (CFTC) is beseeching investors to exercise caution and perform due diligence when considering the sales pitches of cryptocurrency retirement products that use confidence-inducing phraseology like "IRS approved" or "IRA Approved."
According to the CFTC, many taxpayers focus on saving for retirement at tax time "in order to increase deductions or maximize savings." The commission believes that some fraudulent entities may use this trend to prey on customers by portraying cryptocurrency retirement products as less risky.
An example of a fraudulent sales pitch provided by the CFTC is as follows:
"This investment has been approved for your IRA. You can use your IRA for this investment by filling out the forms in the attached information package, and our agent will take care of the rest. This has been reviewed by the IRS. This investment is so safe you can use it for your IRA. Only certain investments can be approved for your IRA."
The CFTC notes that the IRS does not review or approve investments related to IRAs or, more specifically, to cryptocurrency IRAs, stating that "advertisements or solicitations that use this kind of deceptive language should be viewed with caution."
Moreover, the statement reiterates the fact that federal agencies in general do not: 1) endorse investments, 2) advise people on how to invest, 3) issue statements that an IRA has protected status because a trustee or custodian has been approved by the IRS or is regulated by a federal or state body.
Particular attention is paid to the sale of self-directed IRAs, or IRAs that don't require investors to abide by the rules of traditional IRAs, which usually restrict investors to products owned by the issuing brokerage company. Because self-directed IRAs allow a riskier range of investment products, such as real estate, tax liens, and notes, and because their investments are chosen by the investor themselves, the CFTC believes those individuals may be at greater risk for manipulation.
"While self-directed IRAs may offer investors greater diversity or opportunities," notes the CFTC, "alternative investments come with their own unique risks that retirement savers need to research and carefully consider."
"Ponzi schemers and other fraudulent promoters have exploited self-directed IRAs because they can hold unregistered investments, and they encourage investors to hold the investments for long periods of time."
Finally, the CFTC provides advice for protecting yourself against Ponzi schemes and fraudulent promoters more broadly:
•Avoid investments touting themselves as IRS or IRA approved.
• Consult your investment advisor, financial planner, accountant, or attorney before starting a self-directed IRA, and be sure you understand the rules and penalties.
• Never transfer or rollover your IRA or 401(k) directly to a virtual currency or investment promoter.
• Do not expect extra safety or less volatility from investments in a retirement plan.
• Thoroughly investigate the virtual currency plan promoter. Check to see if the person or company is registered using the tools on SmartCheck.gov. Also, verify the custodian or trustee is registered with state or federal regulators.
• Only speculate with money you can afford to lose.
• There is no such thing as a guaranteed investment or trading strategy. If someone tells you there is no risk of losing money, do not invest.
Source (https://www.ethnews.com/cftc-issues-timely-advisory-for-cryptocurrency-retirement-accounts)