More About IRA Fees

BY VICTOR TRIVETT

“Tax Planning Tips for 2000 and Beyond” ( JofA, Nov.99, page 10) recommends paying IRA fees from separate funds, rather than from the IRA. This is desirable only if the fee is deductible from taxable income and reduces the taxpayer’s tax liability. But, in many instances, because of the 2.5% reduction in miscellaneous itemized deductions or if deductions are not itemized or no tax is due, paying the IRA fee does not reduce taxes for the year and is wasted.

Charging IRA fees to the IRA generally reduces taxes, as the fees reduce taxable distributions later.

Paying the IRA fee from separate funds is but 3% better than having the IRA pay the fee. The future value of nondeductible fees paid with non-IRA funds is 34% greater than if the IRA paid the fees.

It is doubtful the taxpayer or the CPA will be able to notify the IRA custodian each year—just before the fee is charged—who is to pay the fee to save only 3% of a small fee. It’s better just to charge it all to the fund, except in the few cases where the taxpayer’s miscellaneous itemized deductions are almost always sufficient to reduce taxes.

Victor Trivett, CPA
Miami

RESOURCES

Keeping you informed and prepared amid the coronavirus outbreak

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.

VIDEO

Excel walk-through: Sparklines

Want to liven up your spreadsheets with some color and graphical elements? Kelly L. Williams, CPA, Ph.D., shows how to use Excel sparklines, which illustrate data trends and patterns via small charts that fit in a single Excel cell.