2 Missed RMD's

[Kram BergGold]

My client inherited an IRA and failed to take her RMD in 2015 and 2016. We just discovered this. Can I include both of them on the 2016 Form 5329 with a waiver request or do I prepare a 2015 Form 5329 and send it in by itself and a 2016 Form 5329 which gets filed with the tax return?

[FEDUKE404]

Missed RMD needs Form 5329

My client inherited an IRA and failed to take her RMD in 2015 and 2016. We just discovered this. Can I include both of them on the 2016 Form 5329 with a waiver request or do I prepare a 2015 Form 5329 and send it in by itself and a 2016 Form 5329 which gets filed with the tax return?

There is no "both" of them.

She (apparently) missed an RMD for 2015, and she apparently missed an RMD for 2016.

You will need to complete a separate Form 5329, Part IX, for each year, and show the amount of that year's RMD, with zero distributed. You request a waiver, and write a little story which [may] include "amount of $x for this RMD was repaid in 2017" or something similar. If the IRS approves your waiver (they generally do unless, ahem!, there is a pattern) that is the end of the story.

The IRS instructions for Form 5329 explain the process further.

At least the Form 5329 is a standalone form.

Oh yes: Remember there is likely a 2017 RMD amount "out there."

FE

[Roland Slugg]

You didn't say if your client was the decedent's wife. If she was, she may not have an RMD obligation at all, depending on her own age and also depending on whether or not she elected to treat the IRA as her own.

You also didn't say if the two missed RMDs were the very first ones she should have taken, or if she had taken one or more distributions in previous years. If she has taken the RMDs for several years, then forgot to do so for two consecutive years, then the only option is to file F-5329 for the two missed years and request abatement of the penalties.

If the decedent died less than five years ago, and your client has never taken any distributions from that IRA, or perhaps took one or two and then missed the last two, I'd be concerned that her distribution pattern constitutes an election to withdraw the IRA's entire balance within five years. I believe this presumption would be especially hard to rebut if your client has never taken any distributions at all. The good news, however, is that there should not be any penalties on the two missed RMD's, because there are no RMD requirements when the 5-year option is elected.

You may need to check and see if the 5-year option requires an affirmative, written election, or if it's simply the beneficiary's actual distribution pattern that decides. I seem to recall, though, that the 5-year option does require a written statement, so you may wish to check on that.