IRA UBTI Taxes post rollover from IRA to 401(k)

[egrobinson]

I rolled over my IRA to my 401(k) in 2023. I recently received a letter from my IRA stating that my closed IRA account owes taxes on UBTI, they are going to file IRS Form 990-T and that they may be required to file without payment (total tax due is $40).  My 401(k) is also unable to pay the taxes due. How do you pay UBTI taxes which are the product of an already-closed IRA account? 

[dmertz · Accepted solution]

If you have another IRA, you could potentially move enough funds back to the closed IRA account  by trustee-to-trustee transfer to cover the UBIT.  If you have no other IRA, you might be able to roll the necessary amount from the 401(k) back into the IRA, plan permitting.  Regardless, this is an amount that should not have been rolled over to the 401(k), so it needs to be removed from the 401(k).