2 min read

Understanding the UBI Tax in an IRA Account


Content provided for general information. Talk to your advisor to learn about recent updates or other rules that may apply to your situation.

As an individual planning for retirement, it is important to understand the different tax implications that may arise when investing in an IRA account. One such event that may occur is the UBI, or unrelated business income, tax. This can be a confusing and daunting concept, so it is important to have a clear understanding of what it entails and how it may affect your IRA account.

What is UBI Tax?

UBI tax refers to the tax on unrelated business income earned by an IRA account. This type of income is generated from activities that are not directly related to the purpose of the account, such as rental income, interest from loans, or business income. According to the Internal Revenue Service (IRS), any income earned by an IRA account that is not related to its tax-exempt purpose is subject to UBI tax.

In your case, it seems that a withholding tax transaction occurred in your Vanguard Traditional IRA Brokerage Account in July 2020 for the amount of $3,987.00, resulting in a 990-T form being created. This form is used to report any unrelated business income and calculate the corresponding tax liability.

Filing an Amended 990-T

It is not uncommon for taxpayers to file an amended 990-T form, as you did in September 2020. This may happen if there was an error in the initial filing or if new information becomes available. In this case, it seems that the amended form indicated a refund of $985.00 is due to you.

It is understandable that you may be concerned about the status of this refund and have requested updates from Vanguard. However, it is important to remember that ultimately, it is the IRS that processes and issues refunds. Therefore, it may be helpful to reach out to a tax advisor for guidance on how to proceed and what steps you can take to follow up on the status of your refund.

Should You File Complaints?

It is natural to feel frustrated with the complexities of taxes and the uncertainty surrounding your refund. However, before taking any action, it is important to understand the proper channels for addressing your concerns. Filing complaints with the SEC, FINRA, IRS, Congressmen, Senators, newspapers, or TV may not be the most effective way to resolve the issue. It is best to first gather all the necessary information and seek guidance from a tax professional.

Taking Control of Your Taxes

While it can be overwhelming to navigate the world of taxes, it is important to stay informed and take control of your financial future. This includes understanding the different taxes that may affect your IRA account and seeking guidance from professionals when needed. A tax advisor can provide valuable advice and help you make informed decisions about your investments and taxes.

In conclusion, UBI tax is an important consideration for IRA account holders and it is crucial to understand how it may impact your investments. In your case, it is recommended to consult with a tax advisor to better understand the status of your refund and any further steps you can take. Remember, taking proactive steps to educate yourself and seeking professional guidance can help you navigate the complexities of taxes and secure a stable financial future for yourself and your loved ones.