rmd

[Bucky]

Broker did not distribute rmd to client in 2005. For some reason thier system missed it. They are going to make the required distribution now in 2006. My question is do I show it in 2005 or wait until 2006. it only $1600. I am not sure if we treat it like we do 401k overpayments for highly compensated employees where they get the money in the current year but was for the prior year and that is where it is reported. Thanks for any help!

Bucky

[Gretel]

You have 2 issues here.

1. Client will have to pay penalty on missed RMD (50%) for 2005. You either write letter to IRS to get it back for reasonable cause (takes over a year in my experience) or client can present bill to broker.

2. The RMD finally paid in 2006 is income for 2006.

[Matt Sova]

RMD 50% penalty

I have filed the 5329 by itself showing the penalty and accompanied that with a letter of explanation and no payment. Only had to do this one time and it was for a 2004 issue and client had no problem with the IRS.

[Gretel]

That's interesting. I didn't dare to not pay the penalty first. Took over a year to get it back.

[Bucky]

rmd

Thanks Matt. I think I will try that.

Bucky