just a quick question for my notes:
I know you are supposed to file the 5329.
If a client forgot or took less than they should have on their RMD, does the IRS have a look back time, like 3 yrs, or can they go back indefinitely to charge a 50% penalty?
thank you,
Douglas
The IRS has been notoriously inefficient in enforcing RMD rules. Compliance with these requirements is normally communicated directly from the IRA custodian to the IRA owner or to a lesser extent to the IRA beneficiary. While the IRS has pledged in recent years to get their act together on this, so far no progress has been made. But this does not mean this situation will last indefinitely, and if the IRS actually gets serious about RMD enforcement there is no telling how far back they might go, since their is no statute of limitations. Filing the 5329 only occurs after the missed RMD has been made up, and then a 3 year SOL goes into effect. Therefore, if the delinquent RMD is never taken, there is no SOL. Another area where the dots are not being connected is the rule that an RMD cannot be rolled over, but in identifying the RMD amount no one is looking back at missed RMDs and adding them to the current year RMD as should be done. Therefore taxpayers are often taking the current year RMD only (while missing some former RMDs) and then rolling over the excess, which is not eligible for rollover because the excess may include delinquent RMD amounts.
Permalink Submitted by David Mertz on Fri, 2019-05-03 22:46
Because Form 5329 is considered to be a separate tax return, the statute-of-limitations clock for a missed RMD does not start running until a Form 5329 reporting the excess accumulation is filed for the year in question. Without the appropriate Form 5329 having been filed, the IRS can assess the 50% penalty at any time. The penalty is best avoided by making the missed RMD and filing the appropriate Form 5329 to request a waiver of the excess-accumulation penalty.