I received a Schedule K-1 for an investment in an IRA account. Should a Schedule K-1 been issued for an investment in an IRA account?

[deberrycw]

It seems to me that this will end as taxable income and should not be since it remains in my IRA account.

[ToddL · Accepted solution]

Yes, a Schedule K-1 should be issued for an investment in an IRA account, but you do not report the K-1 on your tax return.

Activity within an IRA account is reported to IRS by the fund Custodian, not IRA Owner. You get a copy of the K-1 for your records, just as you receive an information copy of Form 5498 (around May) each year. Both report what the custodian has already reported to the IRS.

[ziggy252]

This info needs to be incorporated in the software!

[jannymv]

One question - I received 1728 in distributions on a schedule K-1 I received for a partnership I hold in an IRA. Line 20 V which I understand may be taxable (UBTI) is 3458. Can I be taxed for an amount greater than the total of my distributions?

[DianeC958]

Yes you can be taxed on an amount that is greater than the amount of your distributions.  

If this K-1 is from an investment that is held in an IRA account this information does not need to be reported on your tax return.  The K-1 is for your information.

If you have income in Box 20 with a Code V and it is more than $1,000 you may need to also file a form 990-T.  Your plan administrator should file the form and pay any tax that may be due out of your IRA account, but it is best if you follow up to make sure the form was filed and the tax was paid.

If your plan administrator did not file the form you are responsible to for filing it and paying any tax that may be due.  You would need to print your return, sign, date and mail it in to the IRS with the form 990-T and K-1 you received.

[Edited 03/06/20 10:48 PST]

[gyaqwe]

This answer is favorable for me - but is there a reference or a source for this info that you all can point to, please? Indicating that in IRAs, Schedule K1 should NOT be included on my tax-return?

[ThomasM125]

I can't find a reference that you are requesting, but if the K-1 form has a check mark in Part II, line I2, it is clearly marked as being held in a retirement account, and as such it would not be appropriate to enter it on your tax return.

[edited 4/27/21 at 5:00 PM EST]

@gyaqwe

[gyaqwe]

@ThomasM125  - I couldn't make complete sense of your response. Folks are saying in this chain that this is NOT to be included in my return. On schedule k-1, there's a checkbox (which is checked in my case) - which indicates if the account is an IRA. So then, what part is not clear to IRS - that they may reach out to me for?

[AmyC]

The K-1 may contain UTBI which can lead to a tax situation inside of an IRA or even filing form 990. See About Publication 598, Tax on Unrelated Business Income of Exempt Organizations.

@gyaqwe It does not go on your personal tax return but may trigger having to file another type of return.

[NJGlover]

Hello,

I have shares in Sunoco LP. I received a K-1 from Sunoco and when I went to add the K-1 to my return in TurboTax it indicated that since the K-1 indicated the partnership was in a IRA/SEP/KEOH and the I2 box was checked that the K-1 was not necessary and would be deleted. I have read that Master Limited Partnerships that generate more than $1,000 in income are immediately taxable, even in an IRA. I received about $1,200 in dividends from the partnership in 2020. Was TurboTax correct in deleting the K-1, or should I have filed it with my return? I did not receive anything from my brokerage, just the K-1 from Sunoco directly. Will I simply pay ordinary income tax on the gains when I withdraw them from the IRA when I retire? I don't want to create a mess if I keep earning from this investment and don't pay taxes because TurboTax says I don't have to. I can liquidate the investment and move it into a taxable account if that cleans things up. Thanks for your input.

[Critter-3]

If the IRA has unrelated business income over $1000 the the IRA custodian has to file a return for the IRA ... It is not reported on your personal return. Alert  the IRA custodian of the K-1form you got. 

[NJGlover]

So, I need to inform the brokerage I got a K-1 from the partnership? The distributions are still within the IRA with the Brokerage, so I would assume they know about them. How can I determine if the there is Unrelated Business Income exceeding $1,000? I don't see any numbers on the form that are called that. There's a lot of small numbers and a few negative numbers. Is there a field that shows that? I only made about $1,200 in distributions in 2020. I have not sold any shares, I've just received distributions that I have re-invested in more shares.

[Critter-3]

Please talk to your broker. 

[Hal_Al]

Here's a reference: https://www.retirementwatch.com/yes-ira-taxed-even-roth-ira

[NJGlover]

So, from what I have learned reading this (link below), if Box 20V is greater than $1,000 you need to file a Form 990-T. In my case the number in box 20V is -1.015. I will try to reach someone at the brokerage to see if they can advise me on anything, but if the number is negative I have to assume tax is not owed. Perhaps Sunoco does not generate UBTI, or at lest did not in 2020?

https://www.stratatrust.com/insights/understanding-unrelated-business-taxable-income-ubti-ira/

I definitely don't want to file an amended return over this unnecessarily. I am still confused why TurboTax indicated the K-1 was unnecessary to file without any sort of calculation of the data on the K-1. It dismissed it as soon as I indicated box I2 was checked. This information is hard to find and is not terribly intuitive. Yes, I should probably hire a tax adviser, but TurboTax is supposed to be able to do the math given the data.