2015 RMD came in 2016
Hope you all had a wonderful Christmas and holidays.
Client sent withdrawal form to us on the 30th of December for their IRA-RMD. We called twice to make sure it was processed on the 31st and were told yes. Back and forth with the company, they issued a check on the 4th of Jan. 2016.
The 1099 will show 2016 instead of 2015. The company is not reversing the 1099. we have letter into management to complain.
How does the IRS handle this? Does she include the amount on her 2015 taxes even though the 1099 shows 2016? Do we write a letter to the IRS explaining the company’s fault?
Any help on past events like this?
Thank you very much,
Douglas
Permalink Submitted by Alan - IRA critic on Sat, 2016-01-09 01:06
Client should file a Form 5329 asking the IRS to waive the penalty. It can be included with the 2015 tax return. The waiver request should include an explanation of the “reasonable cause” for the RMD failure. Since the form was only completed on 12/30, the chances of the RMD being late were fairly high and it was submitted too late for the failure to be blamed on the custodian, so the client should probably be looking at reasons why they waited until the final week in December to submit the form. Even if the reason is simply that they forgot, there is a decent chance that the IRS will waive the penalty since the delinquency will be self reported. Client will then have two taxable RMDs in 2016. The RMD is reported only for the year it was actually distributed in accord with the 1099R.
Permalink Submitted by Ed Mangan on Sat, 2016-01-09 02:23
you also have to be aware that when you put in for the withdrawal so late in the year it could take some time to settle the sale of stocks or funds before distribution..most of my brokers take about 3 days to settle the funds before I can move cash from the account. next time give ample time or have cash on hand in the account. just my guess….