Partly a rant but also an alert to others

[SecondAttempt]

I received a letter today from Pershing which operates my brokerage account that I have through T. Rowe Price. Normally things are pretty transparent and my account appears to be through TRP. But they don't make any effort to hide that it is through Pershing either. My TIAA-CREF retirement IRA/403b brokerage account is also through Pershing. I think this is the situation for many brokerage accounts through former mutual fund companies since Pershing has a virtual lock on that market.

So the letter said that a company I held stock in during 2021 had "unrelated business taxable income" in 2021 that is pass-through taxable to me. The company was Enable Midstream Partners. I actually never bought that company but another midstream company I owned was aquired by them and that's how I ended upwith the shares. I think that is mostly irrelevant though.

My beef is that Pershing sent me an amended tax return that I received today (October 25) along with a letter telling me they would be filing it for me on October 17th. The letter is dated October 13th. They say they will be deducting the taxes due and a $200 fee for preparing my return! The income credited to me is over $1000 so the extra taxes and penalties are not insignificant.

So far I have not been charged anything as far as I can tell. Also, this is an IRA so this looks like it is just an incredibly stupid and incompetent mistake on their part. But the form they filed is a 990-T which if for an exempt organization so they seem to recognize the account is exempt from taxes but did it anyway. I think TRP tried to call me on October 17th but I thought it was a spam call and screened it. They did not leave a message.

I will probably run it by my tax preparer just in case. She is an Enrolled Agent and is usually pretty helpful.

Anyway, maybe others have received something similar.

 

[Taxman59]

The unrelated business taxable income is a taxable event for non-profit accounts (which includes retirement plans, IRAs etc). The threshold for filing is $1000 I believe. The problem I have is that they prepared the return and charged you for it without your prior approval. That being said, $200 is pretty cheap for the 990-T (speaking as a retired former CPA whprepared more returns than I would like to remember!).

 

[youbet]

No mistake on their part. They just followed the rules (which you should have known). Don’t own an MLP in an IRA if you don’t want to deal with UBTI.

Instead of ranting and name calling, you’ll be better off using the time googling UBTI and getting yourself informed of the rules.

 

[youbet]

The problem I have is that they prepared the return and charged you for it without your prior approval.

I bet it’s in the account agreement. And isn’t handling UBTI an IRS requirement placed on the account custodian?

 

[Koolau]

No mistake on their part. They just followed the rules (which you should have known). Don’t own an MLP in an IRA if you don’t want to deal with UBTI.

Instead of ranting and name calling, you’ll be better off using the time googling UBTI and getting yourself informed of the rules.

I guess if you can read stuff like that and understand it, you're a smarter person than I. I hope you have gotten rich with the info.

 

[SecondAttempt]

No mistake on their part. They just followed the rules (which you should have known). Don’t own an MLP in an IRA if you don’t want to deal with UBTI.

Instead of ranting and name calling, you’ll be better off using the time googling UBTI and getting yourself informed of the rules.

The unrelated business taxable income is a taxable event for non-profit accounts (which includes retirement plans, IRAs etc). The threshold for filing is $1000 I believe. The problem I have is that they prepared the return and charged you for it without your prior approval. That being said, $200 is pretty cheap for the 990-T (speaking as a retired former CPA whprepared more returns than I would like to remember!).

I guess if you can read stuff like that and understand it, you're a smarter person than I. I hope you have gotten rich with the info.

Upon further inspection it looks like there was a little over $1000 in income, some deductions that are not explained, and everything magically zeros out to zero taxes due. I will probably look even more closely over the weekend but seems I dodged a bullet.

My research tonight seems to find that it is the CUSTODIAN that is responsible for preparing the return, and presumably paying any fee. And like I said, TRP appears not to have charged me.

It looks like the income was reported on a K-1. I have always saved those and gave them to my tax preparer and they basically said it was irrelvant for an IRA. I now use an EA but several years ago we had some complexities and used a CPA and he basically took the same approach although I don't recall the details.

Live and learn I guess!

 

[Winemaker]

I receive annual letters from Fidelity, informing me that as custodian they are reviewing the K-1s in my tIRAs, to determine whether I will meet the threshold to file a tax return for my tIRA. I then get a follow up letter months later that I didn't meet that threshold.