Missed Year-2 Required Minimum Distribution
I inherited an IRA from my father who passed away in 2009. In 2010, I received the first year’s required minimum distribution from this IRA. The custodian told me I did not need to do anything else from that point forward, that the RMD be automatically be sent in each future year.
I realized the first week of January 2012 that I had not received the 2011 distribution. So, I called and was told they didn’t have the paperwork and that I’d have to submit it. New paperwork was sent to them the first week of January 2012 and a check was received a few days later.
So, I missed the 2011 distribution since it arrived in January 2012. And I’ll get another one for 2012 in December of this year.
Do I have to file form 5329, or another form, with my tax return for 2011 explaining this missed year-2 distribution?
Thanks for any advice.
Permalink Submitted by Alan Spross on Fri, 2012-03-02 19:13
Yes, you need to file Form 5329 with your 2011 return requesting that the IRS waive the penalty for reasonable cause. Explain why it was missed and that you have received the 2011 RMD on the date you received it. The IRS will probably waive the penalty. Do not pay the penalty or report the amount that you finally received as income on your 2011 return.
The downside is that you will have two taxable distributions in 2012. To determine your 2012 RMD, do not adjust the 12/31/2011 IRA balance for the missed RMD. Use the exact balance as it was on 12/31/2011.
You can change IRA custodians if you wish by doing a direct trustee to trustee transfer to a new custodian. This one does not sound very efficient. Better check to see if they have your successor beneficiary correctly listed on their records.
Permalink Submitted by john grasser on Fri, 2012-03-02 21:34
Thank you. That’s what I needed to know.
Permalink Submitted by Lee Benson on Mon, 2012-03-05 21:51
I have a similar situation for one of my clients. An inherited IRA was established however the RMD was not disbursed in 2011.
Are the custodians required to notify the inherited IRA beneficiary of the requirement to take their distribution?
In a similar twist, we thought we had enrolled for automatic distributions.
Permalink Submitted by Alan Spross on Mon, 2012-03-05 22:33
My impression is that most custodians do not explain to beneficiaries the status of the decedent’s RMD, but since the decedent could have taken the RMD from other IRAs, each custodian a different custodian would not know that.
The IRS will typically waive the penalty for the decedent’s RMD with a request on Form 5329. That form should be filed on the beneficiary’s return for the year of death, not the decedent’s final return.
Permalink Submitted by mk foss on Tue, 2012-03-06 01:36
IRA custodians are required to notify the IRS when an RMD is required for someone over 70-1/2. There is no such requirement for an inherited IRA. So it’s unlikely that the beneficiary will be notified for future RMDs either. Setting up a system of automatic distributions can prevent 50% penalties.