Reimbursement to IRA for its expenses
Suppose an IRA incurs expenses; in this case, a wire fee to transfer IRA $ to a 401k that was deducted by the brokerage from the money transferred. Can the IRA (or 401k) be given outside funds to compensate it for the wire fee?
The $ movement was to clear it out the IRA for purposes of the pro-rata rule so tax free backdoor Roths could be done. Two years of non deductible contributions (currently a little less than $14k) remain in the IRA for conversion to a Roth.
This is more of an intellectual question than a monetarily significant question as the wire fee is de minimis. But to quote from Dirty Harry “I gots to know.”
TIA
Barry Kaplan
Permalink Submitted by Alan - IRA critic on Fri, 2021-08-13 16:58
There is no additional contribution space due to various IRA fees including maintenace fees, investment management fees, exit fees, or this wire fee. Therefore, if the IRA owner has maxed out the annual contribution, an additional contribution cannot be made.
I doubt that any custodians would offer to bill the wire fee separately so the IRA owner could pay from outside funds (like the formerly deductible IRA maintenance fees), but since the misc itemized deductions subject to 2% of AGI floor have suspended, there is probably little demand for that. These fees are being paid with pre tax dollars so the cost is less expensive than had this been a Roth IRA and paid from after tax dollars.
A 401k plan will not reimburse this fee, but if the funds were going to another IRA custodian, some such custodians have been known to reimburse exit and wire fees in the past.