Rmd

[DTS]

Client rec'd 1099 for annuity in '06 and was reported on that return. Thought she would receive another in '07, but did not. Today, she rec'd a notice from the custodian that an distribution should have been taken for '07 and that the paperwork to set this up to be done automatically was not rec'd until after the IRS reporting date. Letter states she should show this to her tax consultant for '08. Deposit of this RMD was done in '08.

I don't know if this will be reported on the 1099 for '08 along with the '08 distribution (will find out on Monday). I feel I should amend the '07 and show it, but if it's not necessary, I will wait for '08. I do not want her to pay the hefty penalty.

What is the correct way to proceed with this?

Thank you.

[WhiteOleander]

Well, if the distribution was received in '08 and not '07, then you have to report it on the '08 return. T/P did nor receive the money in '07 so it can't be taxed in that year.

There is a 50% penalty for the rmd that was not taken in '07. But, you can ask that the penalty be abated. And they almost always do. Especially if it the first time. Also, it appears the custodian may have dropped the ball. The IRS usually abates the penalty in those circumstances. Use form 5329.

HTH

[DTS]

White Oleander

Thank you.

Not trying to be sneaky, but should I make the service aware of this on the '08 return or not mention it and wait to see if a notice is forthcoming?

D

[WhiteOleander]

I would definately file the 5329 when you file the return. It used to be that you had to pay the penalty and ask for it to be refunded.

But, they changed that several years ago. Now you fill out the 5329 (part VI I think) and ask for the abatement.

I have done this many times. But, I must say the IRS hasn't been too efficient about it. I usually have to follow up with a letter. But, I do give it several months. But, since the client hasn't sent the money yet, at least they aren't losing interest, etc on their money.

They eventually get a letter that says the penalty is abated.

[S T]

Prior Post

Dennis,

I had posted on this subject a while back, and my t/p situation involved multiple years. White Oleander, JG and a few others provided some very valuable information, so hopefully this will assist you. http://www.thetaxbook.com/forums/sho...t=distribution

Sandy

[DTS]

Thank you...

for the clarification and link. I appreciate the help.