Did Your IRA Receive a K-1? Here’s What You Need to Do Next
If a Schedule K-1 arrived for your IRA, you may be wondering why a tax-exempt account is getting partnership tax paperwork. If Box 20 of your IRA’s Schedule K-1 shows code V and the IRA’s total unrelated business income is $1,000 or more, the IRA must file Form 990-T. Any tax owed is paid from the IRA’s own assets, not from your personal return.
Here’s what that code means, when a filing is required, and what to do next.
Why Your IRA Received a Schedule K-1
A Schedule K-1 (Form 1065) reports a partner’s share of a partnership’s income, deductions, and credits. When an IRA invests in a partnership, the IRA itself is the partner. Examples include a publicly traded partnership (often called an MLP), a private real estate fund, or an operating business held through a self-directed IRA. The K-1 is usually issued in the IRA’s name, with the custodian listed “for the benefit of” you.
Most IRA income, like interest, dividends, and capital gains, is sheltered from tax. Income from an active trade or business is treated differently. The tax code applies the unrelated business income tax to IRAs the same way it applies it to other tax-exempt entities.
What Box 20, Code V Means on Your K-1
Unrelated business taxable income (UBTI) is income an IRA earns from an active trade or business, or from debt-financed property, that the tax code taxes even inside a tax-exempt account. Box 20 on Schedule K-1 (Form 1065) reports “other information,” and each item carries a letter code. Code V reports the partner’s share of UBTI, as described in the IRS Partner’s Instructions for Schedule K-1 (Form 1065).
Partnerships report this amount for tax-exempt partners like IRAs because it’s the figure needed to decide whether Form 990-T is required. Common sources include:
- Operating income from energy, pipeline, or other active-business partnerships
- Debt-financed income, such as rent or gains from property bought with borrowed money (called unrelated debt-financed income)
- Business income from an operating company the partnership owns
Debt-financed income catches many self-directed IRA investors by surprise. If a real estate fund or the IRA itself uses a loan to buy property, the share of rent and sale gains tied to that debt can count as UBTI, even though ordinary rent usually doesn’t. If your IRA holds more than one partnership, check every K-1, because the filing test looks at the IRA’s total for the year.
When Your IRA Must File Form 990-T
An IRA must file Form 990-T if it has $1,000 or more in gross income from an unrelated trade or business during the tax year. The test uses gross income, not net income, so add up the UBTI reported across every K-1 the IRA received.
A few details catch people off guard:
- Traditional and Roth IRAs are both covered. Tax-free Roth distributions don’t exempt the account from tax on UBTI.
- The IRA is the filer, not you. The trustee or custodian files Form 990-T, and the IRA needs its own EIN, separate from yours and the custodian’s.
- The tax is paid from the IRA. It isn’t reported on your personal Form 1040.
- Trust tax rates apply. IRAs figure the tax at trust rates, which reach the top bracket at a much lower income level than individual rates. A $1,000 specific deduction reduces the taxable amount.
Example: $4,000 Reported at Code V
Say your IRA’s only K-1 shows $4,000 at Box 20, code V, with no related deductions. Because $4,000 is over the $1,000 threshold, the IRA must file Form 990-T. Subtracting the $1,000 specific deduction leaves $3,000 of taxable UBTI.
At 2025 trust rates, the first $3,150 is taxed at 10 percent, so the IRA owes $300, paid from the account. Larger amounts climb quickly. Trust income above roughly $15,650 hits the top 37 percent rate.
For the full picture of how UBTI is defined, read our guide to the three-prong test for unrelated business income.
Form 990-T Due Dates for IRAs
IRAs have a different due date than most exempt organizations. Form 990-T for an IRA is due by the 15th day of the fourth month after the tax year ends, which is April 15 for a calendar-year IRA.
| IRA | Most other exempt organizations | |
| Who files | Trustee or custodian | The organization |
| Due date (calendar year) | April 15 | May 15 |
| Tax rates | Trust rates | Corporate rate for corporations, trust rates for trusts |
| Extension | Form 8868, six months | Form 8868, six months |
If you need more time, you can e-file Form 8868 for an automatic six-month extension. The extension covers filing only, not payment. If the IRA expects to owe $500 or more, estimated tax payments may also apply, figured on Form 990-W.
Missing the deadline can lead to late filing and late payment penalties plus interest, all paid from the IRA’s balance.
What to Do Next: A Step-by-Step Checklist
- Gather every K-1 the IRA received for the tax year and find Box 20, code V on each.
- Add up the gross UBTI. If the total is $1,000 or more, Form 990-T is required.
- Contact your IRA custodian. Ask whether it prepares Form 990-T, what information it needs from you, and whether it charges a fee. Some custodians file for you. Others sign a return prepared by you or a tax professional filing on behalf of IRA clients.
- Confirm the IRA’s EIN. If it doesn’t have one, the custodian can request one through IRS.gov before filing.
- Prepare and e-file Form 990-T by the due date, or file Form 8868 for more time. Form 990-T must be filed electronically.
- Keep records of each K-1 and any losses that carry forward to future years.
For line-by-line help, see the Form 990-T filing instructions. If the partnership also reported depreciation or asset sales, read our guide to Form 990-T supplemental forms like 4562, 4797, and 8949.
Frequently Asked Questions About IRAs and Form 990-T
Does a Roth IRA Have to File Form 990-T?
Yes. The UBTI rules apply to Roth and traditional IRAs alike. If a Roth IRA has $1,000 or more in gross unrelated business income, its custodian files Form 990-T and pays the tax from the account.
Who Pays the Form 990-T Tax for an IRA?
The IRA does, from its own assets, through the custodian. You don’t report the income on your Form 1040. Ask your custodian or tax pro before paying any IRA tax or fees with personal funds, since that can have tax consequences of its own.
What Happens If My IRA Doesn’t File Form 990-T?
The IRS can charge late filing and late payment penalties, plus interest, and those are charged to the IRA’s balance. If you’ve missed a year, talk with your custodian about filing as soon as possible to limit what builds up.
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