Is RMD on cash or accrual basis

Submitted by Jamie M Castiel on Fri, 2013-03-22 18:08

My client, who is 80 years old, was taking annual required minimum distributions from his 401K plan. He decided, in 2011,to roll over his 401k into a new Individual Retirement Account with Fidelity. Fidelity did not make a distribution in 2011 but they bundled the 2011 and the 2012 distribution together in a 2012 1099r. My client reported his RMD in his 2011 tax return without receiving the funds. My client wishes to keep his 2011 rmd the way he reported in on his tax return and only report his 2012 RMd. What should he do.



Submitted by Alan - IRA critic on Fri, 2013-03-22 19:34

Need more information to determine what is going on here.

  1. When did client separate from service?
  2. Was client a 5% or greater owner or were prior RMDs due to his retirement?
  3. What was the date of the rollover and did he take an RMD out earlier in that same year? Sounds like the rollover was not done until 2012.
  4. Did he get two 1099R forms for 2012?

Submitted by Jamie M Castiel on Tue, 2013-03-26 19:03

The client separated from service many years ago.  He was taking rmd from the 401k plan.he did not take a distribution in 2011, however, he reported his rmd in 2011 individual 1040 tax return.  In 2012 Fidelity issues one 1099R for both years.  He does not want to amend his 2011 tax return because he paid no taxes with the rmd that he reported in 2011.What should he report in 2012

Submitted by Alan - IRA critic on Tue, 2013-03-26 19:33

OK. He cannot report an RMD in 2011 that he did not actually take. He should file a 5329 for 2011 requesting that the IRS waive the penalty and explain that the missed RMD was distributed in 2012. He must report according to the 1099R, ie both distributions are taxable in 2012, the year distributed. Unfortunately, he will pay more taxes than he would have if the 2011 RMD had been taken in the correct year.

Submitted by Jamie M Castiel on Tue, 2013-03-26 19:39

Client included his RMD distribution in 2011 but the cash was paid out in 2012 the custodian paid the 2011 rmd in 2012, and issued a 1099R which included the 2011 and 2012 rmd in the 2012 calendar year.When is the RMD recognized when the monies are paid or when they are reported on his tax return.

Submitted by Alan - IRA critic on Tue, 2013-03-26 19:58

When they are distributed (paid), and that was in 2012. The taxable income is always reported in the year paid and that would follow the 1099R.

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