What is Form 990-T and when does it apply to IRA investments with MLPs?

Form 990-T is actually a tax return used by tax-exempt organizations, including IRAs, to report "unrelated business taxable income" (UBTI). Even though your Roth IRA is generally tax-exempt, certain investments like MLPs (Master Limited Partnerships) can generate income that's considered unrelated to the tax-exempt purpose of the retirement account. MLPs like EPD often engage in active business operations and pass through income to investors. When held in tax-exempt accounts like your Roth, this creates UBTI. If that income exceeds $1,000 in a year, the IRA custodian (Vanguard in your case) needs to file Form 990-T. The reason it's called an "excise fee" is because it's essentially a tax on income that would normally be tax-exempt - it's the government's way of preventing tax-exempt entities from running businesses tax-free that compete with regular taxable businesses. Since your investment is currently at a loss, you don't need to worry about this right now. But yes, if your EPD investment eventually generates significant income (over $1,000 UBTI), your custodian would file the 990-T and you'd effectively pay tax on that portion, even within your Roth IRA.

I had this exact same issue with my Roth IRA last year! I was so confused until I discovered taxr.ai (https://taxr.ai). It's this tool that analyzes all your investment docs and explains everything in plain English. I uploaded my MLP statements and brokerage letters, and it immediately clarified what was happening with the 990-T situation. The tool explained that MLPs in retirement accounts can create this special taxable income called UBTI, and when it exceeds $1000, your IRA custodian has to file that 990-T form. It even showed me exactly what portions of my investment were generating the UBTI and estimated what my potential tax liability might be in the future.

Just wanted to update - I tried taxr.ai after seeing it mentioned here and it was incredibly helpful with my MLP situation! Uploaded my statements from both Schwab and Fidelity, and it immediately flagged the potential UBTI issues with my enterprise products MLP. Explained exactly how the 990-T process works when holding these in retirement accounts. The most useful part was being able to see potential tax implications before they happen. I'm actually considering moving those investments to my taxable account now. Definitely saved me from a future headache!

If you need to actually speak with the IRS about 990-T issues (which I eventually did), I highly recommend using Claimyr (https://claimyr.com). Trying to call the IRS directly about these specialized tax forms is nearly impossible. I spent DAYS trying to get through, but Claimyr got me connected to an IRS agent in under 20 minutes who actually knew about UBTI issues in IRAs. They have this demo video that shows how it works: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an actual human picks up. The agent I spoke with clarified that my custodian was responsible for filing the 990-T for my IRA, but I needed to ensure they had all the correct information about deductions.

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it because I was desperate to talk to someone about my own 990-T issue. Got connected to an IRS tax-exempt organizations specialist in about 15 minutes after trying for WEEKS on my own. The agent explained that my IRA custodian is technically the one who needs to file the 990-T, but I'm responsible for making sure they have accurate information about any allowable deductions related to the UBTI. She also clarified that the $1,000 threshold applies to gross UBTI before deductions, which my custodian had wrong. Literally saved me from a major reporting error.

An important point about MLPs in retirement accounts - the UBTI calculation can be complex. It's not just about whether you sold for a profit. MLPs generate UBTI through their ongoing operations, which flows to your account even if you never sell the shares. So you could potentially trigger Form 990-T filing requirements just by holding the MLP and receiving distributions, even without selling. This is why many investors prefer MLP ETFs (like AMLP or MLPA) in retirement accounts, as they're structured to avoid the UBTI issues.

For what its worth, I ditched individual MLPs in my retirement accounts after dealing with this 990-T headache for two years. Switched to the Global X MLP ETF instead, which avoids the UBTI issue completely while still giving exposure to the sector.

This is such a helpful thread! I'm dealing with a similar situation with some KMI shares in my traditional IRA. Based on what everyone's shared, it sounds like the key takeaway is that MLPs can generate UBTI regardless of whether you sell them, just from their ongoing business operations. @Jasmine Hernandez - to answer your question about knowing how much UBTI is generated, your MLP should send a Schedule K-1 each year that breaks down the different types of income. But since it's in your IRA, Vanguard handles the tracking and will file the 990-T if your UBTI exceeds $1,000. I'm seriously considering switching to MLP ETFs after reading this. The tax complications seem to outweigh the benefits when holding individual MLPs in retirement accounts. Thanks everyone for sharing your experiences - this is exactly the kind of real-world info you can't easily find elsewhere!

Great discussion everyone! As someone who's been dealing with retirement account tax issues for years, I wanted to add a few practical tips for anyone holding MLPs in IRAs: 1. Keep detailed records of ALL correspondence from your custodian about UBTI - you'll need this if questions arise later 2. Don't panic if you get that initial letter from your broker - they're just being proactive about potential 990-T filing requirements 3. Consider the "hassle factor" vs returns when deciding whether to keep MLPs in retirement accounts @Jasmine Hernandez - since your EPD position is currently underwater, you're likely safe from UBTI concerns for now. But if the position recovers and starts generating significant income, you might want to consider the ETF route that others have mentioned. One thing I haven't seen mentioned is that some brokers are better than others at handling these MLP tax complications. Might be worth asking Vanguard specifically about their process for tracking and reporting UBTI before you make any major decisions about your holdings.

This thread has been incredibly educational! I'm relatively new to this community but have been researching retirement account strategies. After reading everyone's experiences with MLPs and UBTI, I'm convinced that MLP ETFs are the way to go for retirement accounts. One thing I wanted to add - I recently spoke with a tax professional about this exact issue, and they mentioned that the UBTI rules apply to all tax-exempt entities, not just IRAs. So if anyone has MLPs in 401(k)s, 403(b)s, or other retirement plans, the same $1,000 threshold and Form 990-T requirements would apply. @Jasmine Hernandez - since you mentioned your EPD shares are currently underwater, you might want to consider this an opportunity to reassess whether individual MLPs make sense in your Roth IRA long-term. The tax-free growth benefit of a Roth could potentially be offset by the UBTI complications if the investment recovers significantly. Thanks to everyone who shared their practical experiences with brokers, tax tools, and IRS interactions. This is exactly the kind of real-world knowledge that makes this community so valuable!

This has been such an enlightening discussion! I'm fairly new to both investing and this community, but I've learned more about MLPs and retirement accounts in this thread than from hours of online research. The key takeaways I'm getting are: 1. MLPs can generate UBTI in retirement accounts even without selling 2. The $1,000 threshold triggers Form 990-T filing by your custodian 3. MLP ETFs avoid these complications while still providing sector exposure 4. Different brokers handle this differently, so it's worth asking about their processes @Jasmine Hernandez - your situation with EPD being underwater actually gives you a good opportunity to decide whether to stick with individual MLPs or switch to ETFs before any UBTI issues arise. Based on everyone's experiences here, the ETF route seems much simpler for retirement accounts. I'm also impressed by the practical tools people have mentioned - both for analyzing tax documents and actually getting through to the IRS when needed. Those seem like valuable resources for anyone dealing with complex retirement account tax issues. Thanks to everyone for sharing their real-world experiences. This is exactly why community discussions are so much more valuable than generic financial advice articles!

Just wanted to chime in as someone who's been lurking on this community for a while but is new to commenting. This thread has been incredibly helpful! I'm in my early 30s and just started maxing out my Roth IRA contributions last year. I was actually looking at some MLP investments after seeing the attractive yields, but reading through everyone's real experiences with UBTI and Form 990-T has completely changed my perspective. The idea that you could trigger tax complications in a supposedly tax-free account just from holding certain investments was totally foreign to me. @Jasmine Hernandez - it sounds like you're in a similar boat to where I was a few months ago, trying to understand these complex rules. Based on what everyone has shared, it seems like the MLP ETF route really is the way to go for retirement accounts. You get the energy sector exposure without all the tax filing headaches. I'm also bookmarking some of the tools people mentioned for analyzing investment tax implications. Prevention is definitely better than trying to sort out complicated tax situations after the fact. Thanks to everyone for sharing such detailed, practical advice - this is exactly why I love this community!

As someone new to this community, I've been following this discussion with great interest since I'm in a very similar situation to @Jasmine Hernandez. I have some MLP holdings in my traditional IRA that I've been wondering about after getting some confusing paperwork from my broker. Reading through everyone's experiences has been incredibly enlightening - especially learning that UBTI can be generated just from holding MLPs, not just from selling them. I had no idea that certain investments could potentially create tax complications even within tax-advantaged retirement accounts. The consensus here seems pretty clear that MLP ETFs are the way to go for retirement accounts. You get the energy sector exposure and income potential without the Form 990-T headaches. I'm definitely going to research some of the ETF options that @Taylor To and others have mentioned. I'm also impressed by the practical tools and services people have shared for dealing with these tax complexities. It's clear that being proactive about understanding these rules can save a lot of headaches down the road. Thanks to everyone for sharing such detailed, real-world experiences. This is exactly the kind of practical knowledge you can't get from generic investment guides, and it's why community discussions like this are so valuable for investors at all levels!

As a newcomer to this community, I've been reading through this entire discussion and it's been incredibly educational! I just opened my first Roth IRA a few months ago and was actually considering some MLP investments after seeing the attractive dividend yields. This thread has completely changed my perspective. The concept that certain investments can generate taxable income even within a tax-advantaged retirement account was totally foreign to me. Learning that MLPs can create UBTI just from their ongoing operations - not just when you sell - is a crucial distinction I never would have understood without everyone's real-world experiences here. @Jasmine Hernandez - it sounds like you're getting some great advice from the community. Since your EPD position is currently underwater, this might actually be a good opportunity to reassess whether individual MLPs make sense in your Roth IRA long-term, especially given all the Form 990-T complications people have described. The consensus around MLP ETFs seems really compelling - you get the energy sector exposure and income potential without the tax filing headaches. As someone just starting out, keeping my retirement accounts simple and avoiding unnecessary complications feels like the smart move. Thanks to everyone for sharing such detailed, practical experiences. This is exactly the kind of real-world knowledge that makes this community so valuable for new investors!

As a newcomer to this community, I've been following this discussion with fascination! I'm in my late 20s and just started contributing to my first Roth IRA last year. I was actually researching energy investments and had MLPs on my radar after seeing those attractive dividend yields, but this thread has been a real eye-opener. The whole concept of UBTI was completely unknown to me - I had no idea that certain investments could potentially create tax complications even within a tax-advantaged retirement account. Learning that MLPs can generate this taxable income just from their ongoing business operations, regardless of whether you sell shares, is such an important distinction that I never would have discovered on my own. @Jasmine Hernandez - your original question sparked such a valuable discussion! It seems like you're getting excellent advice from the community. Given that your EPD position is currently at a loss, this might actually be perfect timing to evaluate whether keeping individual MLPs in your Roth makes sense long-term, especially considering all the Form 990-T complications everyone has described. The overwhelming consensus here about MLP ETFs being a better choice for retirement accounts is really compelling. You still get exposure to the energy infrastructure sector and decent income, but without all the tax filing headaches. As someone just building my investment knowledge, keeping my retirement accounts straightforward and avoiding unnecessary complications definitely appeals to me. I'm also impressed by the practical resources people have shared - both the tax analysis tools and services for actually reaching the IRS when needed. It's clear that being proactive about understanding these rules can save major headaches down the road. Thanks to everyone for sharing such detailed, real-world experiences. This is exactly why community discussions are so much more valuable than generic investment articles - you're getting practical wisdom from people who've actually dealt with these complex situations firsthand!

As someone completely new to this community and investing in general, this thread has been absolutely invaluable! I just opened my first Roth IRA a couple months ago and was actually looking at some energy sector investments, including EPD that @Jasmine Hernandez mentioned. Reading through everyone's real experiences with UBTI and Form 990-T complications has completely changed my investment approach. I had no clue that certain holdings could create tax issues even within a tax-sheltered retirement account - the idea that MLPs generate taxable income just from their ongoing operations, not from selling, was totally foreign to me. The consensus here around MLP ETFs being a smarter choice for retirement accounts makes perfect sense. You get the energy infrastructure exposure and income without all the Form 990-T headaches that everyone's described. As a complete beginner, keeping my retirement investments simple while I'm learning definitely feels like the right move. I'm also bookmarking the practical resources people shared - those tax analysis tools and IRS contact services could be lifesavers down the road. It's amazing how much real-world wisdom is packed into this discussion compared to generic investment guides. Thanks to everyone for being so generous with sharing your actual experiences. This is exactly why I joined this community - getting practical advice from people who've navigated these complex situations firsthand is incredibly valuable for someone just starting their investment journey!