990-T TAX SERVICES & FEES
- $750 & up- 990-T Tax Return Preparation and Filing. Upon receipt of your Quickbooks or other bookkeeping files, we will prepare and file a 990-T Tax Return for your IRA. The fee range varies depending on the number of properties or sources of income. We can quote you once we know the activity in your IRA. Consult time with firm lawyers is billed separately.
- $100/hr UBIT Bookkeeping – If bookkeeping is required to file the return then bookkeeping will be billed at hourly rates.
- $350 – UBIT/UDFI Tax Analysis – If you are planning on entering into an investment where UBIT or UDFI tax may be due, we can run an analysis of the investment and planned income and returns to calculate what UBIT or UDFI Tax may be due.
- $300 – $400 hr. Hourly Consulting on UBIT or UDFI tax with one of the firm’s experienced lawyers.
990-T TAX FILING DEADLINES
- April 15th
- 3 Month extension available by filing form 8868 to the IRS.
IRS 990-T UBIT FORMS & INSTRUCTONS
- Form 990-T, http://www.irs.gov/pub/irs-pdf/f990t.pdf
- Form 990-T Instructions, http://www.irs.gov/pub/irs-pdf/i990t.pdf
- Publication 598, http://www.irs.gov/publications/p598/
990-T TAX RETURNS FOR IRAs & RETIREMENT ACCOUNTS
If you have unrelated business taxable income (aka, UBTI or UBIT) then your retirement account is required to file a tax return to report the income and pay any applicable tax.
DOES YOUR IRA NEED TO FILE A 990-T UBIT RETURN?
There are two common scenarios where IRA owners will need to file a 990-T UBIT tax return. First, if you obtained debt to purchase a property owned by your IRA, then the income from the property is subject to unrelated debt financed income tax (UDFI). UDFI is a type of income that causes UBIT tax and is reported and paid on form 990-T. In essence, the IRS requires tax on the income generated from the debt while the income from the IRA’s investment is not subject to tax.
Second, if your IRA is receiving income from a trade or business that does not pay corporate tax (income from a c-corp is exempt because they pay corporate tax). For example, if your IRA is a member/partner in an LLC that is a software company or a restaurant (or other operations business) then the income for your would be subject to UBIT tax.
VIDEOS & ARTICLES
Here are some videos and article where you can learn more about UDFI and UBIT.
UDFI/UBIT Tax From IRA Owned Property with Debt
http://sdirahandbook.com/buying-real-estate-with-your-ira-and-a-non-recourse-loan/
UBIT Tax Law Library and Rate Schedules
http://sdirahandbook.com/sdira-law-library/ira-tax-on-non-passive-income-ubit-tax-law-cases/
FAQ
Q: I have a property owned by my IRA and I obtained a non-recourse loan to purchase the property. Does my IRA need to file a 990-T tax return?
A: Probably. A 990-T tax return is required if your IRA has income subject to UBIT tax. There is a tax called UDFI tax (unrelated debt financed income) that is triggered when your IRA uses debt to acquire an asset. Essentially, what the IRS does in this situation is they make you apportion the percent of your investment that is the IRAs cash (tax favorable treatment) and the portion that is debt (subject to UDFI/UBIT tax) and your IRA end up paying taxes on the profits that are generated from the debt as this is non-retirement plan money. If you have rental income for the year, then you can use expenses to offset this income. However, if you have $1,000 or more of gross income subject to UBIT then you should file a 990-T tax return. In addition, if you have losses for the year you may want to file 990-T to claim those losses as they can carry-forward to be used to offset future gains (e.g. sale of the property).
Q: How do I file a 990-T tax return for my IRA?
A: This is filed by your IRA and is not part of your personal tax return. If tax is due, you will need to send the completed tax form to your IRA custodian along with an instruction to pay the tax due and your custodian will pay the taxes owed from the IRA to the IRS. Your IRA must obtain its own Tax ID to file Form 990-T. Your IRA custodian does not file this form or report UBIT tax to the IRS for your IRA. Our law firm is preparing and filing 990-T tax returns for our self-directed IRA and 401(k) clients. Contact us at the law firm if you need assistance.
Sadly, not many professionals are familiar with the rules and tax procedures for self-directed IRAs so it is important to seek out those attorneys, accountants, and CPAs who can help you understand your self-directed IRA tax reporting obligations. Our law firm routinely advises clients and their accountants on the rules and procedures that I have summarized in this article and we can also prepare and file your 990-T tax return.