Missed RMD

[MarkCTX]

Client is required to withdraw RMD from his IRA for 2013, but failed to do so. My understanding is he must report the income anyway plus the 50% penalty on Form 5329. Somehow I remember that the taxpayer can write a letter to IRS to request the penalty be refunded. Is this true? Anyone have any experience with this? I understand the financial institution should have said something, but the question is what does the TP do now? It's only $200, so not a big deal.

Mark

[JohnH]

These are copied and pasted from another forum in which I participate:

File the 5329, without paying the penalty due, along with an explanation of the client's age, health/mental status, that once the omission was discovered it was immediately cured, and steps have been to prevent such omission in future years. The IRS will generally not require payment of the penalty in such circumstance


(Please check line numbers) Line 50 enter the RMD, line 51 the actual RMD taken, line 52 enter -0- on the line for the amount subject to the penalty and put "RC" (for reasonable cause) next to that line in parathesis along with the amount you want waived.

[Maribeth]

Thanks John for the info. Just discovered a client is in the same situation for 2013. However, she went into assisted living during 2013 and qualifies for relief from the penalty. Was just going to have to research this! Thanks again!

[Roland Slugg]

My understanding is he must report the income anyway

Your understanding is not correct. He should report the income ... i.e. the distributions from his IRA ... in the year he actually receives them. So if he receives his 2013 distribution late, in 2014, and he also receives his 2014 RMD (or a greater amount) in 2014, he reports the total of both distributions on his 2014 return.

[MarkCTX]

Thanks for the responses. Page 7 of the instructions is helpful. Seems the IRS will waive penalty for "reasonable error". Client is 85 and not in good health. 2013 will not show distribution but will double up in 2014. Software produces an attachment to explain error and remedies taken. That should work.

Mark

[FEDUKE404]

Requesting RMD penalty removal

Thanks for the responses. Page 7 of the instructions is helpful. Seems the IRS will waive penalty for "reasonable error". Client is 85 and not in good health. 2013 will not show distribution but will double up in 2014. Software produces an attachment to explain error and remedies taken. That should work.

Mark

It is my understanding that, even with no (timely) distributions of the RMD type being taken during calendar year 2013, the "penalty" still is assessed on the 2013 Form 1040 but is then nulled out in a manner JohnH described.

The fact that two (late + regular) distributions are later taken during 2014 does not alter that requirement.

Your tax software should provide the proper information for Form 5329, Part VIII. Read all instructions carefully.

Of course, I could also be totally wrong, as some frequently remind others on this board.

(There also have been numerous prior discussions here on the identical subject. Suggest use of "search" function on top right of this web page. . .)

FE

[JohnH]

I'm with you on the "totally wrong" comment.

I've found myself to be totally wrong on a number of occasions and find it necessary to remind myself of that fact on a regular basis.