Permalink Submitted by Jose Morales on Thu, 2015-04-16 16:18
There is no guarantee that the penalty will be waived, but you can ask for a waiver. The client should take the amount of their 2014 RMD immediately, although it will be reported on a 2015 1099-R, not one for 2014. On their 2014 tax forms they need to complete form 5329 to report the excess accumulation penalty. Complete lines 50 and 51 as you normally would to report the excess. Enter “RC” and the amount you want waived next to line 52. Subtract that amount from the total amount of the distribution missed and enter the amount on line 52. Complete line 53 as normal. The instructions do not tell you to inlcude an attached explanation, but you should do so with your reason for why the IRS should waive the penalty. They will determine whether the penalty should be waived. The instructions can be found on page 7 here: http://www.irs.gov/pub/irs-pdf/i5329.pdf
Permalink Submitted by Alan - IRA critic on Thu, 2015-04-16 21:53
I agree with one exception. Since 2014 was apparently the client’s first RMD distribution year, the 2014 RMD deadline was not missed until 4/1/2015. IRS Regs indicate that the 5329 should therefore be filed with the 2015 return, not the 2014 return. The 2014 return would not include the 2014 RMD situation.
Permalink Submitted by Jose Morales on Thu, 2015-04-16 16:18
There is no guarantee that the penalty will be waived, but you can ask for a waiver. The client should take the amount of their 2014 RMD immediately, although it will be reported on a 2015 1099-R, not one for 2014. On their 2014 tax forms they need to complete form 5329 to report the excess accumulation penalty. Complete lines 50 and 51 as you normally would to report the excess. Enter “RC” and the amount you want waived next to line 52. Subtract that amount from the total amount of the distribution missed and enter the amount on line 52. Complete line 53 as normal. The instructions do not tell you to inlcude an attached explanation, but you should do so with your reason for why the IRS should waive the penalty. They will determine whether the penalty should be waived. The instructions can be found on page 7 here: http://www.irs.gov/pub/irs-pdf/i5329.pdf
Permalink Submitted by Alan - IRA critic on Thu, 2015-04-16 21:53
I agree with one exception. Since 2014 was apparently the client’s first RMD distribution year, the 2014 RMD deadline was not missed until 4/1/2015. IRS Regs indicate that the 5329 should therefore be filed with the 2015 return, not the 2014 return. The 2014 return would not include the 2014 RMD situation.
Permalink Submitted by Jose Morales on Thu, 2015-04-16 23:27
That is correct, I did not catch that 2014 was the year in which they attained the age of 70.5.
Permalink Submitted by Alan - IRA critic on Thu, 2015-04-16 21:55
Duplicate – deleted