RMD Info to IRS from Custodians
How does the custodian notify (or do they notify) the IRS about the year end balance that is used for RMD calculations to know if the client took out the correct amount? It doesn’t seem to appear on the 1099. Is there also a coding used on the 1099 to indicate whether it is an inherited IRA distribution?
Permalink Submitted by Alan - IRA critic on Tue, 2016-12-13 00:13
The prior year end balance used for calculating the RMD is reported on Form 5498 each year. The actual distribution is only reported on the 1099R. If a distribution is made after the IRA is re titled in inherited form the 1099R shows code 4 which denotes a death distribution. Since RMDs are subject to the aggregation rules for those who hold more than one account, a 1099R that falls short of the RMD for that account does not necessarily indicate an RMD shortfall since the total RMD can be met through distributions from other IRA accounts that the current custodian is not even aware of. It is up to the IRS to connect these dots. To add another variable, the year of death RMD is frequently not completed by the decedent and must be completed by the beneficiary(s).