Missed RMDs

Submitted by Brent P Stewart on Wed, 2016-06-22 21:05

We recently picked up an 88 year old client with a number of IRAs. We believe that the client may not have taken enough RMDs over the years possibly going all the way back to when he turned 70 1/2. If that turns out to be the case, will we need to prepare 5329s for each year from the time he turned 70 1/2 or can we just prepare 5329s for the 3 currently open years?



Submitted by Alan - IRA critic on Thu, 2016-06-23 00:24

  • Technically, all those years are still open with respect to missed RMDs because the return that had to be filed to start the statute is 5329, not the 1040. See p 24 and 25 in this release by Natalie Choate for related information:  http://www.metrodetroitfepc.org/assets/Councils/MetroDetroit-MI/library/IRAsWithHair2014.pdf
  • Do you have the data to even calculate each year’s RMD?  If you do, it would be reasonable to subtract the RMD that should have been taken from next year end balance to reduce the next year RMD. Since this would be self reported and the makeup distributions would result in most of his current balance being distributed, I have little doubt that the IRS would waive the severe penalty, but the reconstructive research might be very expensive. If you elected to only deal with the last 3 years, I think that the IRS is unlikely to look further back in time despite the red flag 5329 forms you would submit. Perhaps your firm has some guidelines regarding issues existing before assuming accounts.
  • Who has been doing the taxes for this client? Seems like some real negligence there.

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