penalty on excess accumulations

[KWF]

75 year old taxpayer has traditional IRA requiring minimum distributions, but fails to take $10,000 RMD for 2016.

In 2017, t/p realizes prior year RMD failure, so takes 2016 $10,000 RMD amount on June 30th, 2017.

T/p will own 50% excess accumulation penalty for 2016 ($5000).

But will t/p owe any 50% excess accumulation for 2017. In other words, is 2017 penalty pro-rated daily until distribution is taken (in which case he would owe $2500 penalty), or does t/p have all of 2017 to accomplish failed 2016 RMD (in which case he would owe 0 penalty)?

[FEDUKE404]

RMD penalty for 2017 tax return CAN be avoided

75 year old taxpayer has traditional IRA requiring minimum distributions, but fails to take $10,000 RMD for 2016.

In 2017, t/p realizes prior year RMD failure, so takes 2016 $10,000 RMD amount on June 30th, 2017.

T/p will own 50% excess accumulation penalty for 2016 ($5000).

But will t/p owe any 50% excess accumulation for 2017. In other words, is 2017 penalty pro-rated daily until distribution is taken (in which case he would owe $2500 penalty), or does t/p have all of 2017 to accomplish failed 2016 RMD (in which case he would owe 0 penalty)?

The "annual" penalties for failure to take the correct RMD for that year stand alone. The funds withdrawn on 06/30/2017 will be a 2017 issue, and need to exceed the 2017 RMD to avoid additional (2017) penalties. You should already know the 2017 amount to handle the 2017 taxes.

You also should have filed a Form 5329 with the 2016 tax return. (Why not try for a penalty waiver on the 2016 tax return??) A valid approach for "IRS mercy" is to show you fixed the 2016 oversight, and also **NOW** have taken/will be taking the 2017 and future years RMD amounts. For a $5k penalty staring you in the face, that might bear some consideration.

Also review this recent TTB discussion: http://forum.thetaxbook.com/showthre...rs-help-please

FE