Who Reports K-1 in an IRA?

by Bethany Eanes ; Updated July 27, 2017
You are responsible for filing your K-1 in an IRA.

You may receive a K-1 report on earnings you have generated from investing in a partnership, typically real estate or another form of asset rather than a financial product. All K-1 income is typically taxable, but if your investments occur within your independent retirement account (IRA), you will likely find you can defer the tax like other investments in your IRA. You are responsible for reporting this information.

Background

If you earned any income that would classify as K-1 income come tax time, your investment manager will supply you with a K-1 form. This form will arrive around the same time as other key documents like your 1099s and W-2s. However, many K-1 forms arrive late since they are more complicated than other tax documents. If you believe you may be missing a K-1, contact your asset manager to request the document prior to filing your taxes. Once you have gathered all your K-1 documents, separate those which apply strictly to your IRA earnings.

Considerations

Unrelated business taxable income (UBTI) may be incurred on your account. This is a term to define taxable activity that occurs within a nontaxable account. You will know if you owe UBTI by reviewing your K-1 document. Look for Section 20, Code V, where you will find your UBTI on an investment. If the amount is greater than $1,000, you may owe taxes on this portion of your K-1 income.

Filing

When you send in your tax forms, include your K-1 documents. If you determine you owe money due to your UBTI, you must report this on Form 990-T, "Exempt Organization Business Tax Return." At times, your plan provider will have already filled out Form 990-T for you if the provider is aware you will incur taxable income. You can ask your plan provider for assistance if you are uncertain of how to fill out the 990-T.

Implications

If you file a 990-T, the implication is you owe money. The amount you owe is complicated to determine, and the help of a tax professional may be advantageous. You will only owe on the portion of the investment income that was earned due to UBTI.

Warnings

Do not rely on your plan provider to give you all the information you need. While many plan providers do this correctly, the responsibility ultimately falls on you to make sure the K-1 documents and Form 990-T are submitted on time. It also falls on you to assure you have paid correctly.

About the Author

Based in Los Angeles, California, Bethany Eanes began her career in 2006. She specializes in legal, financial, and fitness writing, with publications on DUIAttorney.com and in local papers like "The Daily Breeze." Eanes earned a Bachelor of Science in history with focuses in humanities ad writing from Washington University.

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