RMD Question
This has probably been asked more than once, but here it goes…
I have a client who was waiting to take his RMD by April 1 of 2009 because of turning 70 1/2 by late 2008, which would have meant that he would have had to take another RMD by Dec 31, 2009. Since the IRS waived the RMDs for 2009, is my client only required to take a single RMD for 2010 or should he also be taking a distribution by April 1st of 2010? In other words, did the IRS simply push back his double distribution for 2009 to 2010?
Thank you very much ahead of time for the feedback.
Adam
Permalink Submitted by Alan Spross on Wed, 2010-03-17 00:40
There is a problem here. The 2008 RMD needed to be taken by the RBD even though it was in 2009.
The IRS waived RMDs for the 2009 distribution year, but not for the 2008 distribution year (see Pub 590, p 33). Therefore, client needed to take that 2008 RMD by 4/1/2009 and it sounds like he did not. Therefore, he needs to take the correct 2008 RMD based on his IRA balance as of 12/31/2007.
The 2009 RMD is waived, and the 2010 RMD must be taken by 12/31/2010 using the 12/31/2009 account balance.
Fortuneately, the IRS will probably excuse the 50% penalty if the client follows the Instructions on p 6 of the 5329 Inst. He should take the late RMD ASAP and request the penalty be excused on his 2009 5329 due to confusion over the 2009 waiver as it applied to a 2009 RBD for 2008 RMDs.
This means that for income taxation, he will have two different RMDs in his 2010 gross income, the late one for 2008 and the normal one for 2010.
Permalink Submitted by Adam Bunday on Wed, 2010-03-17 02:11
Wow, thank you so much for that clarification. It’s no wonder that the average joe can’t interpret the IRS rules.