K1 in a retirement account - do I need to report it if I was day trading?
Title: K1 in a retirement account - do I need to report it if I was day trading? 1 I've been doing some active trading in my retirement account this year and somehow got myself into a situation I'm not sure about. I was day trading different stocks and made around $3,500 in profits on one particular company. After the fact, I realized this company was actually an MLP (Master Limited Partnership) that issues K1 tax forms. From what I've read online, you only need to report K1 income if you collect $1,000 or more in distributions from the MLP. But here's my question - since I was just day trading the stock (buying and selling within the same day usually) and never actually held it long enough to receive any distributions, does that mean I don't need to report anything? I never received any actual distributions from the MLP, just made profits from the price movements. Does anyone know if the rules are different for trading MLPs versus holding them for distributions? I'm trying to make sure I do my taxes right without creating unnecessary headaches. Thanks!
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Dmitri Volkov
9 You're in the clear here. Since you were day trading the MLP in a retirement account and didn't receive any distributions, you shouldn't have any K-1 reporting requirements. When you trade within retirement accounts (like IRAs, 401ks, etc.), the gains aren't taxable events regardless of what type of investment it is - that's one of the main benefits of retirement accounts. The K-1 reporting issue primarily affects those who own MLPs in taxable accounts, especially when they receive distributions. Even then, the rule about only reporting if you collect $1,000+ in distributions is a bit of a simplification - technically all distribution income should be reported, but many people use that as a practical threshold. In your retirement account, the tax-advantaged nature of the account essentially shields you from these reporting requirements. You'll only pay taxes when you eventually withdraw funds from the retirement account (assuming it's a traditional and not a Roth).
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Dmitri Volkov
•15 Thanks for the explanation. So just to be super clear - even though this was specifically an MLP that would normally issue a K-1, because I traded it only within my IRA and never got distributions, I won't receive a K-1 form at all? I'm just nervous because I've heard MLPs can create tax complications even in retirement accounts due to UBTI (Unrelated Business Taxable Income). Is that something I need to worry about?
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Dmitri Volkov
•9 You're right to ask about UBTI - that's the one potential exception to what I said. If the MLP generates Unrelated Business Taxable Income over $1,000 in your retirement account, your account could potentially owe taxes on that portion through Form 990-T. However, for day trading where you're just buying and quickly selling shares without receiving distributions, UBTI generally isn't triggered. UBTI typically becomes an issue when you hold the MLP in your retirement account long enough to receive significant distributions that include substantial business income. Since you were just trading the shares for short-term price movements, it's unlikely you'll face any UBTI issues.
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Dmitri Volkov
18 Hey there, I went through something similar last year and wanted to share what helped me. I was trading all kinds of investments in my retirement account, including a few MLPs, and got really confused about the tax implications. I tried researching online but got contradicting information until I found https://taxr.ai which saved me tons of stress. They have a specific tool that analyzes investment documents and transactions to tell you exactly what your reporting requirements are. You can upload your statements and trade confirmations, and it will tell you if you need to report anything on your taxes. For me, they confirmed I didn't need to report my MLP trades in my IRA since I never received distributions, but they also flagged a different investment issue I would have completely missed.
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Dmitri Volkov
•6 How exactly does that work? Do they just look at the documents or do they actually give tax advice? I'm dealing with a similar situation but I've also got some limited partnership investments outside my retirement accounts.
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Dmitri Volkov
•12 I'm a bit skeptical about these online tax tools. How is this different from just asking my accountant? My experience is that most tax software doesn't handle investment edge cases very well, especially with things like MLPs and K-1s.
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Dmitri Volkov
•18 It works by analyzing your actual investment documents and identifying relevant tax situations based on your specific trades and holdings. They use a document analysis system that can recognize investment types, transaction patterns, and potential tax triggers. Unlike general tax software, they specialize in investment-related tax situations and edge cases exactly like MLPs, limited partnerships, and K-1 requirements. The difference from an accountant is speed and cost - you get specific guidance on your documents in minutes rather than scheduling an appointment and paying hourly rates. That said, for really complex situations they'll tell you when it's appropriate to consult with a tax professional.
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Dmitri Volkov
12 Just wanted to follow up - I tried https://taxr.ai after my skeptical question and was pleasantly surprised. I uploaded statements from both my retirement account and taxable account, and they clearly separated what needed reporting and what didn't. For my retirement account MLP trades, they confirmed no reporting was needed, but they caught that my taxable account K-1s had some reporting requirements I would have missed. The system even explained the difference between the two situations and why one triggered reporting while the other didn't. Definitely more helpful than the generic advice I was finding online. They pointed out exactly which lines on my tax forms needed attention. Saved me from both unnecessary reporting and potentially missing required items.
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Dmitri Volkov
7 I had a similar situation with MLP investments, but when I tried to call the IRS to get a definitive answer, I spent HOURS on hold and never got through. After my third attempt, I found a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS representative in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that trading MLPs in a retirement account without receiving distributions doesn't create a reporting requirement for you personally. They explained that any potential UBTI issues would be the responsibility of the retirement account custodian, not you as the individual taxpayer. Having that confirmation directly from the IRS gave me peace of mind that I wasn't missing anything.
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Dmitri Volkov
•11 Wait, how does this service actually work? I thought it was impossible to get through to the IRS these days. Is this some kind of special access line or something? I've been trying to get clarity on a tax notice for weeks.
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Dmitri Volkov
•3 Sorry, but I find it hard to believe that any service can magically get you through to the IRS when their phone lines are perpetually jammed. I've tried calling at all hours of the day, right when they open, etc. What's the catch here? Sounds too good to be true.
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Dmitri Volkov
•7 The service uses technology that navigates the IRS phone system for you and holds your place in line. When they're about to connect with an agent, you get a call back so you don't waste hours listening to hold music. There's no special access line - they're just using the regular IRS phone numbers but with an automated system that handles the waiting. It works because their system can stay on hold indefinitely while monitoring the line for when a human representative picks up. Most people give up after being on hold for an hour or two, but their system doesn't. I was skeptical too until I tried it. There's nothing magical about it - it's just technology that handles the most frustrating part of calling the IRS.
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Dmitri Volkov
3 I've got to eat my words and follow up on my skeptical comment. After continuing to get nowhere with the IRS on my own for another week, I broke down and tried the Claimyr service mentioned above. I was connected to an IRS agent in about 20 minutes. The agent was able to explain my tax notice and confirm I was taking the right approach with my retirement account investments. They even advised me on how to document everything properly in case questions come up later. Honestly kind of shocked at how well it worked after my previous failed attempts. Sometimes being proven wrong is actually a good thing!
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Dmitri Volkov
22 One thing no one has mentioned yet - if you were day trading frequently in your retirement account, make sure your account type allows for that. Some retirement accounts limit the number of trades you can make before they consider it pattern day trading, which might violate the terms of certain account types. This isn't directly related to the MLP/K-1 question, but worth keeping in mind if you're actively trading in retirement accounts. My brother got flagged for this last year and it created headaches with his IRA custodian.
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Dmitri Volkov
•1 I hadn't considered that angle! Is that more of an issue with the brokerage's own policies rather than an IRS tax issue? I'm with Fidelity and have been doing maybe 4-5 trades per week, nothing crazy. Should I be concerned about this?
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Dmitri Volkov
•22 It's primarily a brokerage policy issue rather than a tax concern. The Pattern Day Trader rule generally applies to margin accounts, requiring a minimum of $25,000 in equity if you make 4+ day trades within 5 business days. For retirement accounts, the specific policies vary by brokerage. Fidelity is generally more accommodating with active trading in IRAs compared to some others, so at 4-5 trades per week you're probably fine. Some brokerages might have concerns about "self-dealing" if the trading becomes extremely frequent, but your level of activity sounds reasonable. Just make sure you're not using margin within the retirement account, as that could create issues with prohibited transactions.
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Dmitri Volkov
5 I had a similar situation but with a REIT instead of an MLP in my Roth IRA. Can anyone recommend good tax software that handles these special investment situations well? I've been using TurboTax but it seems confused when I try to enter information about retirement account investments.
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Dmitri Volkov
•19 I've had good luck with H&R Block's premium online version for investments. But honestly, for retirement accounts, you generally don't need to report the specific investments at all unless there's UBTI over $1,000 or you're taking distributions. The whole point of retirement accounts is that the investments grow tax-deferred (or tax-free for Roth).
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Luca Greco
Great question about MLP trading in retirement accounts! As others have mentioned, you're generally in the clear since you were day trading rather than holding for distributions. However, I'd add one important point that hasn't been fully addressed - make sure to keep good records of your trading activity. Even though you likely won't need to report anything for tax purposes, if the IRS ever questions your retirement account activity, having detailed records of your trades (entry/exit dates, amounts, reasoning) can help demonstrate that this was legitimate investment activity rather than prohibited transactions. Also, while UBTI is unlikely to be an issue with your day trading approach, it's worth noting that some MLPs can generate UBTI even without distributions if they have significant business income allocated to unit holders. Since you were only holding positions briefly, this shouldn't affect you, but it's good to be aware of for future reference. The bottom line is that retirement account trading generally shields you from most of these complications, which is exactly why these accounts are so valuable for active investors!
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