Submitted By: Alan
Answered: June 24, 2016 10:59 am

I thought all earnings in my IRA were tax deferred. I received Schedule K-1 showing income. Do I have to report this income now?

Yes. IRAs are taxed on unrelated business income. This may be received if your IRA holds an interest in a master limited partnership (MLP). This income is reported to an IRA owner on Schedule K-1 and must be reported currently on the IRA owner’s tax return; such income is not deferrable. More specifically, unrelated business income over $1,000 triggers unrelated business income tax (UBIT) that is reportable. If you have further questions, contact your IRA custodian or trustee.

Tax Glossary

Cash method of accounting

Reporting income when actually or constructively received and deducting expenses when paid. Certain businesses may not use the cash method.

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