RMD's not satisfied for prior years help please

[nwtaxlady]

New client comes to me and realizes that she had not taken any distributions from her PERS account. She didn't need the money and was letting it sit. She just turned 75 in August this year in 2017. Does she have to take out the required minimum distributions for each year since she turned 70 1/2?

This is how I see it. She would need to take a distributions for:

2013 year she turned 70 1/2
2014
2015
2016
and then this years 2017.

Will this be addressed on the 5329 form on the 2017 tax return to request the waiver and hey look we have satisfied all the past year RMD's? Is that how it is handled?

Thanks for any help.

[FEDUKE404]

Repairing the unpaid RMD damages

New client comes to me and realizes that she had not taken any distributions from her PERS account. She didn't need the money and was letting it sit. She just turned 75 in August this year in 2017. Does she have to take out the required minimum distributions for each year since she turned 70 1/2?

This is how I see it. She would need to take a distributions for:

2013 year she turned 70 1/2
2014
2015
2016
and then this years 2017.

Will this be addressed on the 5329 form on the 2017 tax return to request the waiver and hey look we have satisfied all the past year RMD's? Is that how it is handled?

Thanks for any help.

This topic has been discussed much in the past. Did you try a TTB search?

Simplest answer: In theory, there is a separate penalty for each tax year involved, i.e. when a RMD was not taken within the required time period. See Form 5329, Part IX. Although the IRS is fairly generous about granting penalty waivers, don't expect to get one for all three or four years the 50% penalty is involved. By all means, be sure that the current (2017) RMD amount is withdrawn!!

I don't recall if any "catch-up" withdrawals will make much difference at this time, but *IF* you are going to consider a waiver request, then showing proper contrition (and payments!) might possibly make a difference as to abating some of the penalty.

It should be noted that the Form 5329 can be used as a "stand-alone" form, meaning it can be prepared/submitted separately from an actual Form 1040. (You would need to locate the specific Form 5329 for each of the prior years.)

Related question: Financial institutions are fairly proficient at sending out annual written notices of RMD amounts and general tax rules related to same, often with the annual Form 5498. Did she just throw those in the trash?

Good luck!

FE

[Kram BergGold]

Suggestion

I would have her get all the distributions. They will be taxable in 2017. I would file a stand alone 5329 for each year asking for a waiver. A key is to have her set things up for automatic yearly withdrawals. So you can tell IRS this will not happen again.

[FEDUKE404]

Paying off RMD past amounts

I would have her get all the distributions. They will be taxable in 2017. I would file a stand alone 5329 for each year asking for a waiver. A key is to have her set things up for automatic yearly withdrawals. So you can tell IRS this will not happen again.

Excellent approach, as that 50% penalty can be quite painful.

My concern would be whether the IRS will feel "kind" for what was/is a recurring mistake. I've only had to deal with "Year #1" penalty waivers, and they all went through fine.

One issue: If she runs the table to make peace with the IRS by taking the earlier RMD withdrawals "late," she might really get her clock cleaned for the 2016 (already filed?) and/or 2017 returns due to the income boost. She might even find herself wandering into the Land of IRMAA!

FE