calculating RMDs

Submitted by Arthur Dicker on Thu, 2014-10-09 20:00

Taxpayer date of birth is 7/11/1941, he turned 70-1/2 and 71 in 2012. Year-end balance on 12/31/2011 was $26,500, so RMD for 2012 was $1,000 = 26,500/26.5. Taxpayer failed to take RMD in 2012. Year-end balance on 12/31/2012 was $26,600, so RMD for 2013 would be $1,000 = (26,600 – 1,000)/25.6. He failed to take RMD in 2013. Year-end balance on 12/31/2013 was $26,700, so RMD for 2014 would be $1,000 = (26,700 – 2,000)/24.7. Total missed RMDs = 3,000. These are hypothetical numbers to make the math easy, I just want to make sure I am calculating RMDs correctly, without regard to penalties. Thank you,



Submitted by mk foss on Thu, 2014-10-09 20:41

When calculating later RMDs you do not adjust the 12/31 balance for the missed amounts. It’s easier to just use the 12/31 balance each year and that is the correct way to do this. If all missed distributions are withdrawn in 2014, he will owe income tax that year on all of them. It may be possible to have the penalties waived for 2013. His first RMD was due 4/1/13 based on the 12/31/11 balance and his second was due 12/31/13 based on the 12/31/12 balance so he only has to request a penalty waiver for one year. Form 5309 can be filed separately if his 2013 Form 1040 has already been filed.

Submitted by Alan - IRA critic on Thu, 2014-10-09 20:41

  • When the 2002 IRS RMD Regs were passed, the year end valuation adjustment for missed RMDs ended in the interest of simplification. Each years RMD would then be figured using the ACTUAL prior year end value without adjustment. Taxpayer would use 26,600 for the 2012 year end and 26,700 for the 2013 year end balance. That would increase total missed RMDs to around 3,120.
  • Taxpayer wouldn’t file a 5329 for 2012 because the 2012 RMD was not delinquent until 4/1/2013. It would be filed for 2013 requesting a penalty waiver for reasonable cause for the 2012 and 2013 late RMDs. The 2012-2014 RMDs would be distributed in 2014 before requesting the penalty waiver for reasonsable cause on 2013 5329, so taxpayer could state that all delinquent RMDs had been brought current. IRS would usually waive the penalty for any reasonable excuse when taxpayer self reports like this. Since the distribution for all 3 RMDs would be in 2014, they are all taxable in 2014. 

Submitted by Arthur Dicker on Fri, 2014-10-10 13:35

Thank you for your comments.  Does the same rule apply to 403(b)s and 401(k)s?

Submitted by Alan - IRA critic on Fri, 2014-10-10 19:21

The calcalution mechanics are the same, however the required beginning date is deferred if employee is still working and not a 5% owner, and the 403b year end balance is generally allowed to exclude the 12/31/1986 balance until age 75.  Also, the plan administrator of a 401k will usually force out RMDs so taxpayers are much less likely to fall behind for multiple years.

Submitted by Arthur Dicker on Mon, 2014-10-13 15:47

One last question.  Suppose taxpayer did not know he even had this old account and just found out about it.  Missed RMDs go back several years.  Of course he will take the missing RMDs immediately and request a waiver of penalties for good cause.  With respect to the penalties, is there a statute of limitations for missed RMDs?  For example, suppose first RMD was due in 2006, is the penalty barred by statute of limitations at this point?   Thanks again for your comments.

Submitted by Arthur Dicker on Mon, 2014-10-13 16:28

Reporting the penalty and requesting a waiver on Form 5329 for each year:  I know you can file Form 5329 by itself if you did not file a tax return for the year.  However, inasmuch as the tax on excess accumulations has no effect on the rest of one’s tax return, can you also file a Form 5329 all by itself even you if did file a tax return for the year, or must you file a Form 1040X for each year showing no changes except for the penalty on Form 5329 (for which you are requesting a waiver)?

Submitted by Alan - IRA critic on Mon, 2014-10-13 17:23

  • The 5329 Instructions are very ackward, but the intent is to require a 1040X along with the 5329 if a return was filed for that year. No reason the IRS would need the 1040X, and many people just file the 5329 by itself and it goes through. However, the IRS has also been known to reject the 5329 unless the 1040X is also completed. A couple posters here have had that happen.
  • There is no statute of limitations for IRA related excise taxes, but along with the excess contribution exposure some tax attorneys have recommended filing a blank 5329, which will start the 3 year statute “just in case” an infraction might have occurred. Of course, that itself might well trigger closer IRS scrutiny as they would probably wonder what data had been omitted from the 5329. Note that when an IRA owner passes, the beneficiaries are ONLY responsible for completing the year of death RMD. The Regs say nothing regarding the scenario where the taxpayer never took an RMD, but I doubt the IRS would proceed against the estate of the decedent for back taxes.

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