May 25, 2023

What Is a 990-T Form, and What Is its Purpose?

Written By: Daniel Gleich

Key Points 

  • Tax-exempt organizations use Form 990-T.
  • Form 990-T reports on unrelated business income.
  • Madison Trust Specialists can help you understand the form.

Forms First

IRS Form 990-T is a form used by exempt businesses, organizations, and Self-Directed IRA holders to report unrelated business taxable income. IRA account holders are responsible for filing Form 990-T if their IRA investments generate UBIT (Unrelated Business Income Tax) and/or UDFI (Unrelated Debt Financed Income). Examples of situations when you might need a 990-T Form include:

  1. When an IRA invests in a business that generates active income as defined by the IRS. In this case, the profits are subject to UBIT (Unrelated Business Income Tax) and the filing of Form 990-T is required.
  2. When an IRA uses leverage to purchase an investment. The earnings attributable to the leveraged portion are subject to UDFI (Unrelated Debt Financed Income), so the filing of Form 990-T is required.

Avoiding Penalties

Failing to fill out the 990-T form can put you at risk of penalties because you will have unreported income. The form helps you determine what UBIT liabilities you might have incurred.

A Form 990-T attached to a clipboard on a desk with a paperclip and colorful post-it notes

A Solution in Conclusion

If you're still uncertain about what a 990-T form is and whether you need to file one, the Self-Directed IRA Specialists at Madison Trust can help. We want to help our clients understand every step of the process of investing with a Self-Directed IRA so you can gain full control of your retirement investments.  Check our information center to find the crucial forms that IRA account holders must file, or contact us and let us assist you further.

Disclaimer: All the information contained on our website is a general discussion for informational purposes only. Madison Trust Company does not provide legal, tax or investment advice. Nothing of the foregoing, or of any other written, electronic, or oral statement or communication by Madison Trust Company or its representatives, is intended to be, or may be relayed as, legal, tax, investment advice, statements, opinions, or predictions. Before making investment decisions, please consult the appropriate legal, tax, and investment professionals for advice.  

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