Technical question regards to RMD
I have a technical question regards to RMD. At year end (or before year end), does the mutual fund cmpany (who has my IRAs) send me something to tell me how much RMD I should distribute this year ? or I have to calculate the amount myself ? Then how does IRS even know how much I should distribute this year ? If my calculation is short (let’s say $200 short), what will happen to my TAX ? thanks.
Permalink Submitted by Alan Spross on Sat, 2012-10-06 19:12
The IRA custodian will send you and the IRS Form 5498 or equivalent statement by Jan 31 of the RMD year, and check the RMD box. Custodians have a choice of either providing you with the RMD for their particular IRA account or offering to calculate the RMD if you request assistance. Therefore, you do not have to calculate the RMD yourself if you do not wish to do so.
If your distribution is less than your actual RMD, you will owe a 50% excess accumulation penalty for the amount of the shortfall. However, in many cases the IRS will waive the penalty if you file Form 5329 and ask them to waive the penalty for reasonable cause.
For the year you turn 70.5, you can postpone your RMD until 4/1 of the following year if you wish. If you do, then you will have to take out 2 RMDs in the following year.
You can also “aggregate” your RMDs if you have more than one IRA account. You must calculate each RMD separately, but you can then take that total amount in any combination you wish from your IRAs.
Permalink Submitted by Peter Foley on Sat, 2012-10-06 20:08
Thanks, this answered my question..