Many IRA investors are completely unaware that an IRA’s investments (whether made out of a “Traditional” or Roth IRA) can potentially produce currently taxable income to the IRA itself – resulting in both tax to the IRA, but also a special tax return filing (Form 990-T). In the “self-directed IRA” world, this is particularly a problem – both because it comes up more regularly, but also because it can be difficult to initially detect. I wrote about the “black hole” nature of self-directed IRAs way back in October 2013 in the Journal of Accountancy and all of those problems still exist in the marketplace today.
Laura Saunders of the Wall Street Journal published her article today entitled Are Taxes Lurking in Your Tax-Free Retirement Account?, which discusses the hidden dangers that IRA taxes [known as “Unrelated Business Taxable Income” (UBTI)] can present. Ms. Saunders consulted with me on this article and I was referenced (or quoted) in several places. Take a look!