Seymour Goldberg, a Garden City, N.Y., lawyer and retired professor of accounting at Long Island University, says many people are mystified by the forms and choices they must deal with. And custodians may give only a cursory look at how you open, run, or draw on a Keogh. But should you be audited or call attention to the plan by, say, shifting a Keogh into an IRA, the price can be stiff. The IRS could end the plan and reclaim years of tax deductions. It also says it will be less draconian during audits.
Nobody is sure how to stop new savers from making the old mistakes.
Goldberg says the IRS should better inform savers how to handle Keoghs or require custodians or others to monitor the plans. But you lose flexibility in the size of deposits you can make and in limiting the expense of covering an employee. Ask about qualifications and trust your gut.