Deducting Management Fees for IRA
Before anybody decides to roast me for this, please know that I am/have not ever advocated doing this. I think the tax code is fairly clear when it comes to this. However, in the course of the year I come across tax returns where the investment advisor fee is overstated by several thousand dollars.
Here is the question. I know that all 1099s are now being submitted electronically to the IRS and that info is being fed into the IRS “super computers”. And that info is being matched to what is reported on returns. Anybody hear of anybody receiving a form for the overstating of expenses equivalent to a CP-2000?
I mean they have the information, just figure it is a matter of time…
Permalink Submitted by Alan - IRA critic on Sat, 2015-09-12 00:03
A 1099R will not report a direct fee deduction from the IRA, only amounts that are distributed to the IRA owner or for a QCD or direct rollover. Such direct payment of fees is of course not deductible, so if someone deducted them, it would have to be discovered througn IRA audit, not by 1099R matching. Conversely, if the IRA owner has management billed personally and pays it from taxable savings, these payments qualify for misc deductions subject to the 2% AGI floor. A related problem is billing management fees to an IRA that include fees for a Roth IRA or taxable management costs. Only the fees applicable to TIRA management can be billed to the TIRA for obvious reasons. This would also have to be discovered via audit.
Permalink Submitted by Jimmy Rench on Mon, 2015-09-14 16:55
I was referring specifically to the managment fees on 1099s for taxable accounts not matching to what was taken on the returns because individuals also include management fees for IRAs in their 2% misc deductions.Prohibited IRA transactions can have some scary consequences.