simple yes/no IRA tax question

[albundyz]

I'm 71. ALL my retirement money is in an IRA at Vanguard. If I buy a 5 year US Treasury note using my IRA, I get interest paid to me every 6 months. Interest from a US Treasury note is generally taxable for federal purposes.

Am I forced to report that interest income on my tax return OR is that interest non taxable because it is inside my IRA?

I understand that normally, you only pay income tax on IRAs when you take a distribution. So, if I DON'T take any distributions, will I still have to report the interest on my tax return and, hence, pay taxes on it?

 

[COcheesehead]

No

 

[SecondCor521]

I'm 71. ALL my retirement money is in an IRA at Vanguard. If I buy a 5 year US Treasury note using my IRA, I get interest paid to me every 6 months. Interest from a US Treasury note is generally taxable for federal purposes.

Am I forced to report that interest income on my tax return OR is that interest non taxable because it is inside my IRA?

I understand that normally, you only pay income tax on IRAs when you take a distribution. So, if I DON'T take any distributions, will I still have to report the interest on my tax return and, hence, pay taxes on it?

Well, you asked two questions, and the first one is a compound one.

1a. No, you're not required to report that interest income.
1b. Yes, it is tax-deferred because it is inside your IRA.
2. No, you won't have to report that interest on your tax return, and hence you won't pay taxes on it.

The answers above assume you're talking about a traditional IRA. If it's a Roth IRA, the answers are the same except in 1b substitute "tax-free" for "tax-deferred".

 

[gauss]

No tax on traditional IRA activity until funds are withdrawn/distributed from the IRA (assuming Unrelated Business Income does not come into play -- which it doesn't in over 99% of cases IMHO)

From IRA Pub 590-a (linked above)

Unrelated Business Income
An IRA is subject to tax on unrelated business income if it
carries on an unrelated trade or business. An unrelated
trade or business means any trade or business regularly
carried on by the IRA or by a partnership of which it is a
member. If the IRA has $1,000 or more of unrelated trade
or business gross income, the IRA trustee is required to
file a Form 990-T, Exempt Organization Business Income
Tax Return. The Form 990-T must be filed by the 15th day
of the 4th month after the end of the IRA’s tax year. See
Pub. 598, Tax on Unrelated Business Income of Exempt
Organizations, for more information.

-gauss

 

[MarieIG]

No -

but:

having the treasury in a traditional IRA does not relieve you of any RMD requirements.

I purchased some short-term treasuries in my Vanguard IRA. I wanted to see if I could convert one in kind - but received a warning that I could not convert it kind to a Roth - unless I was converting my entire account. You can call Vanguard directly to confirm whether this information is correct if it makes a difference to you.