Do Advisory fees charged to a SEPP bust the SEPP

You are here:
< Back

L1: Do Advisory fees charged to a SEPP bust the SEPPI have a SEPP. Can my fee based advisor take his fees directly out of the SEPP without busting it?2012-07-14 12:46, By: Tom Fleck, IP: []
L2: Do Advisory fees charged to a SEPP bust the SEPPYes. Many of us had that happening in our SEPP’s while they were running. In my case it was 1% of the value of the fund that was being withdrawn by the advisor, each year, taken out in qtrly increments. It does not end up on your 1099-R.2012-07-14 13:16, By: Ken, IP: []

L3: Do Advisory fees charged to a SEPP bust the SEPPKen is correct and I want to expand a little on his response.
Any fees, not just the 1% advisory fee, withdrawn from the IRA are expenses of the IRA and do not count as “distributions.” Annual IRA fees, typically $35 for a brokerage account platform, transaction fees, or sales charges if using a commission-type account are NOT considered “distributions.” Only “distirbutions” from the IRA are reported as income on the Form 1099-R.
Jim F2012-07-14 13:47, By: Jim F, IP: []

L4: Do Advisory fees charged to a SEPP bust the SEPPTo clarify further, “distributions” are payments made to taxpayers, or for taxpayers in the case of related income tax withholdings remitted to the IRS or states.2012-07-14 20:14, By: dlzallestaxes, IP: []

L5: Do Advisory fees charged to a SEPP bust the SEPPFor a fee based on the % of your IRA balance, you have two choices for payment:
1) If the advisor will bill you directly outside the IRA, you can pay the fee from your other funds and you may qualify for a misc deduction subject to 2% AGI floor. But since your other funds come from your SEPP distributions, your SEPP dollars will go further if you have the advisor bill the IRA directly.
2) If advisor bills the IRA directly, it is NOT a reported distribution as dlz indicated. Moreover, the fee is paid with pre tax dollars and that reduces the net cost of the fee unless youcan fully deduct the fees as mentioned above.
Most SEPP participants would benefit most from having the IRA billed directly due to the two potential benefits cited above.
2012-07-15 00:04, By: Alan S, IP: []

L6: Do Advisory fees charged to a SEPP bust the SEPP(Since originally posting my response I have been able to read it with a new viewpoint. We used to be able to “preview” our responses before posting so now it requires posting and editing. This is one of those situations. Here is the “edited post.”)

In a fee based account, the RIA can “bill the account” in one of two ways.
1. The RIA sends the account holder, the client, a physical bill and the investor sends a personal check from non IRA assets … like a non-qualified brokerage account …payable to the RIA. This situation generally occurs when the IRA investments don’t generate enough income due to their “lack of liquidity” like real estate (not REIT’s) and gold. Another situation is when the investor has a large enough advisory feecombined withother miscellaneous deductions subject to the 2% floor to make them deductible, then the investor “chooses” to pay fees outside of the IRA.
2. The RIA bills fees through the IRA custodian which is a brokerage platform.RIA fees are listed in the quarter ending account statement, generally near the end of the statement, and they are deducted from the account and paid to the RIA entity.
I hope this helps.
Jim F2012-07-19 14:09, By: Jim F, IP: []