topic Turbo Tax Deluxe said no need to file K-1 if Part II Box 12 is checked entirely within my Roth IRA but IRS is sending CP2000 in After you file

Turbo Tax Deluxe said no need to file K-1 if Part II Box 12 is checked entirely within my Roth IRA but IRS is sending CP2000

grandpaknei — Thu, 24 Oct 2019 16:04:13 GMT

I responded to the first CP2000 saying tax was due but got a second one saying thanks for your comment but pay up.

My interest in the partnership referenced in the CP2000 is entirely within my Roth IRA and is so indicated in Part II, box 12 of the K-1 submitted by The Ishares S&P GSCI Commodity -Indexed Trust. Turbo tax omitted the K-1 omitted the K-1 because the brokerage account and earnings are held by my retirement plan and I should not have to report any of the K-1 information on my personal tax return unless withdrawn from the Roth. IRS did not respond directly to my point of law, only reiterated I owe $125 plus interest. This pertains to Turbo Tax for 2017 and 2018. I will try to see what Turbo Tax says for 2019 once I get it downloaded.

Re: Turbo Tax Deluxe said no need to file K-1 if Part II Box 12 is checked entirely within my Roth IRA but IRS is sending CP2000

macuser_22 — Thu, 24 Oct 2019 16:21:34 GMT

Assuming that this is what you are referring to.

There is no need to report it on your tax return but that does not mean that it is not taxable. The IRA itself (via the trustee of the IRA) must file and pay the tax.

Unrelated business income is reported on a 990-T form.

If you hold a Limited Partnership or LLC in your IRA then any Unrelated Business Income in excess of $1,000 is taxable (even though it is in an IRA). It is not reported on your tax return but on a 990-T form. (The custodian of your IRA is required to file the form for you but you must submit the K-1 form(s) to them - ask the custodian about this).

Unrelated Business Income is reported as code "V" in box 20 on the K-1 form.

Also see pub 598.
http://www.irs.gov/publications/p598/ch01.html

Per the 990-T Instructions: https://www.irs.gov/pub/irs-pdf/i990t.pdf

"Who Must File
Trustees for the following trusts that
have $1,000 or more of unrelated trade or
business gross income:
1. Individual retirement accounts
(IRAs), including traditional IRAs"
4. Roth IRAs described under section
408A,

Re: Turbo Tax Deluxe said no need to file K-1 if Part II Box 12 is checked entirely within my Roth IRA but IRS is sending CP2000

Anonymous — Thu, 24 Oct 2019 17:04:43 GMT

tt is right if box 12 is check, the k-1 is not reported on your 1040 return

partnerships report unrelated business taxable income (UBTI) in box 20 (2018) if over $1,000, for any type of retirement account it is suppose to file 990-T

you will see the same in TT for 2020- box 12 check - don't report on 1040. look at box 20 for UBTI and if over $1,000 you'll need to do a 990-T which TT doesn't handle.

sorry, but pay the IRS what it asks because penalties and interest continue to build.

https://www.irs.gov/pub/irs-pdf/f990t.pdf

Re: Turbo Tax Deluxe said no need to file K-1 if Part II Box 12 is checked entirely within my Roth IRA but IRS is sending CP2000

dmertz — Thu, 24 Oct 2019 17:56:01 GMT

You are identifying the box incorrectly. It's box I2 (box [letter i] 2), not box twelve. If you identified the box incorrectly in your response to the IRS, perhaps the IRS misunderstood your response.

Also note that the Schedule K-1 must have the EIN of the IRA custodian as the partner's identifying number. It must not have your SSN. The name of the partner should probably also include the phrase "Roth IRA" such as "[Your Name] Roth IRA." If the preparer of the Schedule K-1 did not prepare the schedule correctly, find out why and obtain a corrected Schedule K-1.