Does tax from UBTI have to come out of the retirement account and if so, can it be part of your RMD?

Forum|Forum|1 year ago
July 23, 2024
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Best answer by dmertz

UBIT is paid by the retirement account using the assets in the retirement account. It is not paid by you and simply reduces the value of your retirement account. It is not a distribution, so it does not count toward your RMD.

dmertzAnswer

Employee

mysman1Author

Thank you. In my case, the IRS took the withdrawal, and charged some interest/penalty. In the future how do I avoid this? Can I directly pay the IRS from my retirement account?

dmertz

Employee

Normally the retirement account would file Form 990-T to report the UBTI and pay the UBIT. If the trustee of the retirement account requires you to prepare the Form 990-T, that would require coordination with the trustee of the account. Did Form 990-T not get filed and the IRS ended up assessed the tax and took funds from the retirement account to pay the UBIT? The IRS "withdrawing" funds from the account under these circumstances would not be a distribution and would not be reported on Form 1099-R.