RMD beneficiary penalty
I have a client who inherited an IRA from her 91 year old father in 2012. Her father had not taken enough distributions to satisfy his RMD for 2012. It is my understanding that my client was suppose to withdraw enough from the IRA in 2012 so that the total withdrawn by her father and her equaled or exceeded the RMD for her father. The problem is that no withdrawals were made by my client in 2012.
My question is: When must my client pay tax and penalty on the RMD that was not taken out of the IRA? On her 2012 return or 2013?
Permalink Submitted by Alan - IRA critic on Fri, 2013-03-15 03:43
Your client is very likely to get the penalty waived. She should file a 5329 with her 2012 return and request the waiver for “reasonable cause” (per p 6 of the 5329 Inst) and state that she has made up the remainder of her father’s 2012 RMD. She might also include a copy of the statement showing the distribution. The tax on this distribution will be in 2013 (the year received) plus her ordinary RMD for 2013. The IRS waives most of these penalties since it takes time to sort out the decedent’s RMD status and take action.