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New Member
posted Jun 3, 2019 1:04:49 PM

Can my IRA custodian pull fees for my taxable accounts from my IRA? Or can I only pull fees that are applicable to my IRA from my IRA?

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20 Replies
Alumni
Jun 3, 2019 1:04:50 PM

If you pull money out of your IRA (for whatever reason) it will be taxable income to you.

Level 15
Jun 3, 2019 1:04:51 PM

Are you asking about IRA management fees?

That depends on the terms of the IRA agreement with the financial institution.  Review the agreement fine print or ask the IRA custodian.

New Member
Jun 3, 2019 1:04:52 PM

I'm referring to investment advisory fees.  Say i have 4 accounts at Schwab - 1 IRA and three taxable accounts.  My question is is it permissible to aggregate the total fee due on all 4 accounts and have that pulled from IRA?

Alumni
Jun 3, 2019 1:04:54 PM

Only the IRA fees can be paid from the IRA without it becoming income to you.  I don't have a cite, its just how retirement accounts work.

Level 15
Jun 3, 2019 1:04:55 PM

why would you want to do that?
maintenance fees paid by the tax-deferred account are not deductible.
maintenance fees paid by you, from a regular account, are deductible subject to limitation
not to mention you are depleting your tax-deferred funds.
P.S. a Maintenance fee can be paid from your tax-deferred account and is not considered a distribution.

Alumni
Jun 3, 2019 1:04:56 PM

They took away the Investment fees deduction with the Misc Itemized Deductions for 2018, didn't they?

New Member
Jun 3, 2019 1:04:57 PM

Even if the fiduciary allows you to pay fees for other taxable accounts from your IRS, those fees would count as a taxable distribution from your IRA.  

New Member
Jun 3, 2019 1:04:58 PM

Thanks - can you provide me with some sort of cite for that rule?  Treasury Reg or otherwise?

New Member
Jun 3, 2019 1:04:59 PM
New Member
Jun 3, 2019 1:05:01 PM

Also Chapter 3 here:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p550.pdf">https://www.irs.gov/pub/irs-pdf/p550.pdf</a>

New Member
Jun 3, 2019 1:05:02 PM

Thanks - I've seen that article, but it is 5 years old and I was looking for a definitive source - like the IRS or treasury regs.  Publication 550 specifically says it does not apply to IRAs (see the into) and Pub 590A & B don't include any info regarding the payment of fees, so I'm at a loss as to where this rule "lives."  I'm not concerned with the deductibility rules, but more concerned about fees for other non-IRA accounts being deducted from IRAs.  Thanks for all the help though!!  I appreciate it.

Level 15
Jun 3, 2019 1:05:03 PM

What rule are you referring to?

You can take money out of your IRA anytime you want and use it for any purpose including paying for financial advice.  It will be taxable the same way as any other distribution.   There is no regulation that treats fees for investment advice any different than any other IRA distribution, it simply does not exist.   IRS Pub 590B tells you how IRA distribution are treated.

Level 15
Jun 6, 2019 1:47:51 AM

If I were you I would immediately instruct your IRA custodian NOT to use funds from your IRA to pay fees on any taxable account.  That's because, if done improperly this could cause taxes, penalties, and perhaps a “prohibited transaction,” which can lead to seriously negative consequences.  Fees should be paid from the account generating the fee.  This web reference gives a good discussion on this topic:  <a rel="nofollow" target="_blank" href="https://www.scottkays.com/article/2013/08/28/how-should-you-pay-investment-management-fees">https://www.scottkays.com/article/2013/08/28/how-should-you-pay-investment-management-fees</a>

New Member
Jun 6, 2019 1:47:52 AM

Thanks - yes, I've seen that article as well.  That's my concern - that it WILL be treated as a distribution.  Fees for management of the IRA itself can be deducted and will NOT be considered a distribution.   I have seen that article and the treasury reg cite he uses for this point is no longer valid.  I am looking for the regulation(s)  that specifically says that if the custodian deducts investment management fees that are not related to the IRA, it will be deemed a distribution.  Thanks though!

Level 15
Jun 6, 2019 1:47:54 AM

Of course it would be a distribution if paying for anything outside the management of the IRA.  

Your question was "Can they pull fees", yes, they probably *can* with the proper authorization, the real question is *would* they do that.  I highly doubt that Schwab would even do that since that would require them to account separately for the fees to manage the IRA and fees to manage outside of the IRA and the  issue a 1099-R at the end of the year showing the taxable distribution form the IRA that would be a normal distribution subject to normal tax.

The reason you find noting about "fees" in IRS Pub 590B is the tax law is not written to say what you cannot do, tax laws say what you can do and how it is taxed.  If you do not find a law that says that you can do something then yiu can't.

Level 15
Jun 6, 2019 1:47:56 AM

A pertinent web reference:
"As a result of the prohibited transaction treatment in particular, it’s absolutely crucial not to have a retirement account pay someone’s personal bills or engage in inappropriate transactions – which includes not allowing your retirement accounts to pay investment advisory fees for your personal, non-retirement accounts!"  <a rel="nofollow" target="_blank" href="https://www.kitces.com/blog/irs-rules-for-paying-investment-fees-from-taxable-and-retirement-accounts">https://www.kitces.com/blog/irs-rules-for-paying-investment-fees-from-taxable-and-retirement-accounts</a>.

Level 15
Jun 6, 2019 1:47:57 AM

Not only would withdrawal of IRA funds to pay fees for an unrelated account be a taxable distribution, but the 10% early withdrawal penalty would also apply if you're under age 59 1/2.

Level 15
Jun 6, 2019 1:47:59 AM

Here's a thought: move your IRAs to a broker that does not charge maintenance fees.

Level 15
Jun 6, 2019 1:48:01 AM

According to Schwab's website, they charge no fees to open or maintain an IRA account.  <a rel="nofollow" target="_blank" href="https://www.schwab.com/public/schwab/investing/accounts_products/accounts/ira">https://www.schwab.com/public/schwab/investing/accounts_products/accounts/ira</a>

Level 15
Jun 6, 2019 1:48:03 AM

The OP said "investment advisory fees".   Schwab does indeed have some paid investment services ranging from .28% to .90% of invested assets - fees vary.