Dad died in 1994, found out beneficiary in 2012 – missed RMD – tax penalties?
May dad died in 1994 – I didn’t even know he had a Roth – I’m assuming it was a Roth as Box 5 on 1099 is checked, $15,000 with $6,000 Employee/contributions/Designated Roth contributions or insurance premiums, $9,000 taxable amount to me on 1099. The company did not provide me any more information. What steps do I need to take to find out tax consequences? They told me I had to take lump distribution at the time (beginning of 2012) when father would have been 72 – died at 54 years. Thanks!
Permalink Submitted by Alan - IRA critic on Sat, 2013-02-02 03:16
What you were told is incorrect. This could not be a Roth account of any kind because Roths did not exist until 1998. I assume the IRA box in box 7 is NOT checked. The amount is modest enough and late enough such that you should just report the income of 15,000 on line 16a and 9,000 on 16b of Form 1040. There is no early withdrawal penalty because box 7 should also include the number 4. As for penalties for failure to take RMDs sooner, I suggest you file Form 5329, and attach an explantion requesting that the penalty be waived for “reasonable cause”, and tell the IRS you withdrew the entire balance as soon as you found out about the account. The IRS should waive the penalty, but if you have any written evidence of the late discovery, include it with your explanation.
Permalink Submitted by Michael Tiernan on Sat, 2013-02-02 10:57
thank you
Permalink Submitted by Michael Tiernan on Sat, 2013-02-02 12:38
So, I think this is employee stock option plan pay out – further research indicates I may be entitled to $5,000 death benefit exclusion as he died in 1994?
Permalink Submitted by Alan - IRA critic on Sat, 2013-02-02 18:01
We are just guessing now what type of plan was distributed. I suggest you call the issuer and get an explanation of what this plan was, and how the taxable amount was calculated. If it’s an annuity, the death benefit exclusion may already be reflected in the Box 5 and taxable amount. If it’s a life insurance contract, the box 5 amount could be the premium and the taxable amount is the 19 years of interest accrued. Many of these 1099R forms show a phone number to call regarding questions. Once you know what type of plan this was, questions can be narrowed down considerably.