Client did not take mrd for 2014 prior to 12/31/14. Asking to have 50% penalty waived. Will the mrd for 2014 & 2015 be considered as income for 2015, or will I have to amend 2014 when it is received ? Thanks,
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Both considered income for 2015. Getting the penalty waived should be easy since you are showing they want to comply. Was there a good reason for missing the RMD? Was it the first one? If so, there is a provision to take both out in the second year without penalty. -
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Cannot put income into a prior year
It would be extremely difficult to amend a 2014 tax return to report income (from the delayed 2014 RMD) that could not possibly have been received during calendar year 2014.Originally posted by mrbill View Post
The instructions for Part VIII of Form 5329 are quite clear as to the procedure to follow in order to abate the penalty, assuming this is a "one-time" event that the taxpayer has/is showing good faith to resolve.
Aside from that, there will be two RMD's for calendar year 2015 that will need to show up on the 2015 tax return. Yes, that will definitely cause a spike in his income and all that accompanies same (possibly more taxable Soc Sec, less medical deductions to use, higher tax bracket, etc.).
FEComment
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RMD Paid Out in January
I have same situation..client didn't take RMD until January due to family health problems. As the 2014 tax return was not filed yet, is it possible to take the amount on 2014 rather than 2015 and file the form 5329 Part VIII with the 2014 tax return? I think both RMD has to on the 2015 tax return but want to be sure as I never had this situation. What year's return does the 5329 get filed to request the penalty relief?Comment
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Cannot CHANGE potential 2014 penalty
Not unless you are in the possession of a time machine. . . . . . .Originally posted by marlenew View Post
The RMD was required for calendar year 2014 and was not (and cannot be) taken between the period of 01/01/2014 and 12/31/2014.
The 50% penalty therefore applies to the 2014 return, as does the Form 5329.
As stated before, your only choice is to assign the 50% penalty to the 2014 Form 5329 (Part VIII) or to justify an abatement of said penalty per the specific IRS instructions for line 51.
The client will also (likely) have *two* RMD withdrawals for calendar year 2015, which can really mess things up for his overall tax liability.
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Rmd paid in januay
I found my answer -- 5329 Part VIII must be filed with the 2014 tax return and taxpayer will have TWO RMD on the 2015 tax return.Comment
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When is 5329 due? Help!!
Darn, I just e-filed my 2014 yesterday. I retired 12/31/14, and requested that the amount of my qualified plan be directly rolled over to an individual IRA. I was surprised that the amount transferred was reduced by an RMD for both 2014 and 2015. and received an RMD for both years in February, 2015. No 1099 was received, simply a confirmation of the distribution indicating the amount for 2014 & 2015 and one number for tax withholing. I was 71 on 10/29/14. It was my understanding that since I was 70-1/2 in 2014, the first withdrawal wasn't required until April, 2015 following the later of my retirement date or retirement date. I did not include the 2014 distiribution for 2014 and assumed the correct reporting was to report everything in 2015.
If that's correct, should I have filed a Form 5329 on my 2014 return, or should it be filed with my 2015 return.? Or, since the RMD was distributed prior to April 1st, is a Form 5329 still needed?
I would appreciate any help anyone can offer.Comment
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You will get the 1099R for both withdrawals probably at the beginning of next year (January 2016) as that is when they are mailed out. And it appears correct. You deferred the 2014 distribution to 2015 (required prior to 4/1/15) which is what they did. They also issued the 2015 RMD. They just accomplished that at the same time the funds were rolled over. I don't see where a 5329 is required for either year. Part VIII is for figuring the tax where a required RMD is missed. Just make sure your new custodian is aware of what happened, so they don't issue another RMD for this year.Comment
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Thanks, Burke for affirming my handling appears correct. My custodian is aware of the situation.Originally posted by Burke View PostComment
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Additional on RMD planning
I agree with Burke.
There is no need for a 2014 Form 5329, and it appears your wishes for a "double" RMD during 2015 have been appropriately followed.
That approach may not work for everyone, however. While it is true you obviously transferred the additional income (RMD #1) from 2014 to 2015 and then added RMD #2, for some folks that can backfire due to landing in a higher tax bracket, more Soc Sec taxed (or Medicare B monthly premiums get increased!), shrinkage of allowable medical deductions, and etc.
One caveat: Be certain you have not authorized any "automatic" future RMDs *unless* that is your wish. I have several clients with multiple retirement accounts, some from which they take NO "required" RMDs in a given year due to market conditions and account components (they remove funds from other accounts). So long as you take, from somewhere, the total RMD amount (that would otherwise appear on line 50 of Form 5329) you are OK.
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