Tax on fees
Wondering if someone has info on the following:
Question: Person has taken his RMD from his total initial IRA account.
Then he has moved $88,188 to a ROTH IRA. He knows to pay tax on the ROTH amount.
His transfer company admin charged a fee of $4,045 on the moving of funds from the 401k to the new custodian. The custodian is required to document and report to IRS all activity in the newly created IRA and his new ROTH, for which they charged $150 each, (x2).
The question is whether he must pay a tax on the fee amounts (total of $4,345) as if they were a personal expenditure of new income to his personal account in addition to his RMD amount of $16,376.52, or are taxes waived on transactional fees from brokereage houses, etc. as investment costs or losses?
Thanks.
Ray
Permalink Submitted by Alan Spross on Fri, 2011-12-30 20:13
This is about the worst fee abuse I have ever heard. He should complain and try to get the fees reduced, as they are grossly excessive.
However, fees deducted directly from the plan are not taxable distributions to him and should not be included on his 1099R. He should have the 1099R in about a month and should check it closely.
Note that if he had a 401k and an IRA. the RMDs must be satisfied separately from each plan, and must be taken before any additional amounts are converted to a Roth IRA. You mentioned both a TIRA and a 401k plan, so that would require separate RMDs from each.
Permalink Submitted by Raymond Khan on Fri, 2011-12-30 23:30
Alan,
Thanks as always for your quick response; it is Greatly appreciated!
Ray