Self-directed IRA investors must be aware of their self-directed IRA tax reporting responsibilities. Some of these items are completed by your IRA custodian, and others are the IRA owner’s sole responsibility.
Below is a quick summary of what should be reported to the IRS each year for your self-directed IRA, and who is responsible for each piece. The ultimate authority and responsible tax person on the account is you, the account owner.
IRA Custodian Files
Your IRA custodian will file the following forms to the IRS annually. As a custodian of IRAs, Directed IRA electronically files these with the IRS on applicable accounts. (Different versions of these forms apply to HSA and Coverdell/ESA accounts.)
IRS Forms Filed by Your Custodian (2025 Activity)
Depending on your self-directed IRA investments, you may be required to file the following tax return(s) with the IRS for your IRA’s investments/income:
| IRS FORM | Purpose | What Does it Report | Due Date |
|---|---|---|---|
| Form 1099-R | Reports distributions and certain reportable transactions | IRA distributions, Roth conversions, and certain rollovers (for example, non trustee-to-trustee distributions/rollovers) | By Jan. 31, 2026 |
| Form 5498 | Informational reporting of contributions and year-end value | IRA contributions (including rollovers), Roth conversions, and fair market value (FMV) as of 12/31/2025 | By May 31, 2026 |
*If a due date falls on a weekend or legal holiday, the IRS generally treats the next business day as timely.
Important note about Form 5498: No taxes are due or paid as a result of Form 5498. It is informational only. Many taxpayers receive Form 5498 after filing their personal return because IRA contributions can be made up to the tax-filing deadline.
IRA Owner’s Responsibility
Depending on your self-directed IRA investments, you may be required to file the following tax return(s) related to your IRA’s investments/income. In some cases, the entity your IRA invested in files the return (for example, a partnership return), but you still need to make sure it is completed correctly for an IRA owner.
IRA Owner Reporting Checklist (Common Scenarios)
| IRS FORM | Does my IRA need this? | When It’s Due (Typical Calendar-Year Entity)** |
|---|---|---|
| Form 1065 (Partnership Return) | If your IRA owns an interest in an LLC/LP taxed as a partnership, the partnership files Form 1065 and issues a Schedule K-1 to your IRA. | March 16, 2026 (Extension typically available) |
| Form 990-T (UBIT/UDFI Return) | If your IRA has unrelated business taxable income (UBTI) or unrelated debt-financed income (UDFI), your IRA may be required to file Form 990-T and pay any tax due from IRA funds. | May 15, 2026 (Extension typically available) |
**Due dates can vary based on the entity’s tax year and specific facts. The above reflects the most common calendar-year deadlines.
A few reminders on these two items
1) Partnerships and K-1s (Form 1065)
If your IRA is an owner in an LLC, LP, or other partnership, the partnership should issue a K-1 to the IRA (not to you personally). The K-1 should be made out to the IRA’s custodian titling (for example, “Directed Trust Company FBO [Client Name] IRA”), and it should use the custodian’s tax ID/EIN (or the IRA’s EIN if the IRA has one for 990-T purposes), not your personal SSN.
If your IRA owns an LLC 100%, the LLC is commonly treated as a disregarded entity for federal tax purposes (single-member LLC) and generally does not file a separate federal return. (State rules and elections can change this, so confirm with tax counsel.)
2) UBIT/UDFI (Form 990-T)
Most self-directed IRAs do not need to file a 990-T. The most common triggers are:
- Debt-financed real estate (non-recourse loan creates potential UDFI tax), and/or
- Active business income (operating businesses or frequent, business-like flipping/development activity)
By contrast, the following are generally exempt from UBIT in many common IRA investing scenarios:
- Rental real estate income (without leverage)
- Interest income
- Capital gains
- Dividends
Because UBIT/UDFI is fact-specific, it’s important to work with a CPA or tax attorney who understands self-directed retirement accounts.
Frequently Asked Questions
Q: My IRA is a member in an LLC with other investors. What should I tell the accountant preparing the company return?
A: Tell them the K-1 must be issued to the IRA (custodian FBO IRA titling), and it should use the custodian’s EIN (or the IRA’s EIN if the IRA has one). Do not put the IRA income on your personal SSN.
Q: Why does Directed IRA require an annual valuation?
A: Your custodian must report your IRA’s fair market value as of 12/31 on Form 5498. If your IRA owns alternative assets like LLC interests or real estate, you are responsible for providing an accurate year-end valuation so the custodian can report it correctly. For clients of Directed IRA, annual fair market value updates are due by March 1st.
Q: My IRA used a non-recourse loan to buy property. Does my IRA need to file a 990-T?
A: Often, yes. Debt-financed income can trigger UDFI (a type of UBIT). Even if you don’t owe tax after deductions and depreciation, filing may still matter, including for tracking losses and carryforwards. Your CPA/tax attorney should review the facts.
Q: How do I file a 990-T and pay any tax due?
A: Form 990-T is filed by the IRA, separate from your personal return. If tax is due, it must be paid from IRA funds. Your custodian generally does not prepare or file the 990-T for you. A knowledgeable tax professional can prepare the return and provide instructions to the custodian to pay the IRS from the IRA.
Final Thoughts
Self-directed IRAs offer tremendous flexibility and investment control, but that control comes with additional responsibility. Understanding which forms are filed by your custodian and which filings remain your obligation is critical to staying compliant.
Directed IRA can help with custodial reporting and account administration, and KKOS Lawyers can assist clients and their advisors in understanding and executing more complex compliance and tax strategy issues (including UBIT/UDFI matters).
Disclaimer: This article is for educational purposes only and does not constitute legal, tax, or investment advice. Consult qualified advisors regarding your specific situation.
