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dbooksta
Level 2

I took a distribution from my traditional IRA to pay its management fee. How do I file to avoid the distribution tax?

I took a distribution from my traditional IRA to pay the account management/advisory fee.  Distributions for that purpose are not supposed to be taxed.

 

In TurboTax, how do I indicate this so that it is not considered a taxable distribution?

2 Replies
dmertz
Level 15

I took a distribution from my traditional IRA to pay its management fee. How do I file to avoid the distribution tax?

Unfortunately, this is a taxable distribution.  It's only nontaxable if the IRA custodian takes the fee for management of the IRA directly from the account and does not issue a Form 1099-R.  The fact that you received a Form 1099-R indicates that you yourself took a distribution to pay the fee outside of the IRA, and the fact that the money was used to pay a management fee is irrelevant to taxability of the distribution.

KarenM90
Level 11

I took a distribution from my traditional IRA to pay its management fee. How do I file to avoid the distribution tax?

Yes, dmertz is correct.  You can pay investment management fees or financial planning fees that are structured as a percentage of assets directly out of the account being managed.

 

It’s not considered a withdrawal from an IRA account when fees are paid this way. 

 

Generally, once the funds are distributed to you, they can be considered taxable.

 

 

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