Self Directed Checkbook LLC IRA 1099-DIV forms

5 Replies

I have a self directed "checkbook" LLC IRA. The LLC has a bank savings/checking account as well as a brokerage account to hold funds until they are needed for an alternative investment. The LLC received a 1099-int from the bank as well as a 1099-DIV from the brokerage. According to the custodian, Provident Trust, these 1099s must be addressed on my personal tax return, even though they are for the LLC IRA and no tax would be due. Does anyone know how to do this? TurboTax is no help, and the IRS hotline rep was also no help.

@Gene Mitchell

You have been provided with incorrect information by your custodian, unfortunately. This is not uncommon. As administrators of IRA accounts and a fiduciary, IRA custodians are prohibited by rule from providing tax or legal guidance, but sometimes in a desire to be helpful an un-trained customer service person will provide what could be construed as such.

If the LLC is a single member entity as it should be, you can simply file away the 1099 forms with your LLC records and forget about them. The tax liability of the LLC flows through to the tax-exempt IRA account, and - if the EIN was obtained properly - the IRS should be aware of this. The IRA custodian will file a 5498, which is all that the IRS requires.

The firm that provided the LLC entity for you should be able to provide more detailed and accurate guidance on such a topic. We certainly do that for our clients.

@Gene Mitchell

Brian is correct, the LLC is considered to be a pass-through entity. In your case the IRA is the member of the LLC, not you personally so those forms that you received should not go to your personal tax return. Since the member of the LLC is tax-exempt entity you would not have to report the income on the tax return.

This is not a tax advice and you should consult with your personal tax advisor. 

thank you for the timely replies! Your explanations certainly make more sense than the information I was given by my custodian! I will check with the legal firm that originally set up my LLC ira. Unfortunately, they ( Guident) were bought out by idirectlaw so I may have to find the original attorneys and ask this question. Idirectlaw said I needed to file it as a disregarded entity, which I don't think I should have to do, as it was set up as an ira in the beginning.

Originally posted by @Gene Mitchell :

I have a self directed "checkbook" LLC IRA. The LLC has a bank savings/checking account as well as a brokerage account to hold funds until they are needed for an alternative investment. The LLC received a 1099-int from the bank as well as a 1099-DIV from the brokerage. According to the custodian, Provident Trust, these 1099s must be addressed on my personal tax return, even though they are for the LLC IRA and no tax would be due. Does anyone know how to do this? TurboTax is no help, and the IRS hotline rep was also no help.

 Full Disclosure, I work for Provident Trust Group.

Hey Gene, 

This doesn't sound like information we would typically give, and I apologize for any confusion, and our team not getting you complete information. It sounds like there was a miscommunication with whoever you received that information from regarding your situation. The information you should have gotten is how the IRA LLC structure works, and why the 1099s are, for lack of a better term, just for your records.

Because your LLC is claimed as a disregarded entity, any profits and loses pass to the owner of the LLC, in your case this would be the IRA. Because your IRA is tax sheltered, these 1099s become basically non-relevant other than for you to track activity.

I will speak to our customer service department about how they word this, but often times a client and representative can have confusion regarding the LLC owner, and typically our customer service agents will say that "In the case the LLC is a disregarded entity any profits and loses must be reported by the owner of the LLC". This is absolutely true, even in the case of an IRA being the owner, which is tax advantaged, because we are still required to report fair market value of the account via form 5498.

Again apologies for any confusion, but you don't need to report anything via your personal tax return. Please feel free to reach out to me directly if you have any further questions, or if you feel the issue hasn't been satisfactorily resolved.

Thanks!

thanks adam, appreciate you speaking with your customer service folks. I thought I explained myself pretty clearly to the rep, but maybe there was some miscommunication. good to know that I can file the 1099s.

Gene