Methods for receiving payment to a self directed IRA

[Ruth Ann Morris]

I am trying to set up a way to receive interest payments on loans we are making through a self directed IRA. I first tried Venmo, but that method was questionable because of how it was titled. I am looking at PayPal for business and thought that would work because it allowed me to set up the account in the name of the business and then asked who the representative was. That seemed like it was good until I looked at the profile for the account and it said I was the holder of the account for the business. Does that then make it so that I am “touching the money” and making the transactions become prohibited transactions? We are about to set up our first financing arrangement and the bank holding our business account does not us Zelle or Popmoney. An ACH transfer would cost both the business and the business paying back the loan money. What are our choices short of changing banks.... We already use 4 banks with 15 different accounts and don’t want to deal with another bank.

[Scott Smith]

You're right to be very cautious here. You don't even want to LOOK like you're self-dealing, or "touching the money." @Carl Fischer's suggestion of using a bill pay service is a good one. 

In the meantime, you can bone up on common prohibited transactions. Getting up-close-and-personal with the Department of Labor's prohibited transaction rules can help you continue to avoid them. Those penalties for prohibited transactions are no joke. Your SDIRA provider may have some suggestions as well, but keep in mind that like all companies, they're looking out for their own bottom line. 

Another way you could approach this is to get the opinion of a tax or real estate attorney with experience in self-directed investing. Bonus points if that attorney is an investor as well. This may sound expensive, but it doesn't have to be. The penalties would certainly cost more. But you can also exploit the thirst for business among attorneys by taking advantage of cheap or free consultations. I may take a beating from the other lawyers here for making that suggestion, but it could work for a straightforward question like yours to be sure you're getting the correct answer. Of course, do your homework on your professional to make sure they're qualified to give you the answer you need.