Alan,
Can you address my 10.26.24 response to the above topic?
Should Jacob make (3) separate RMD distributions in 2024? Then make a 4th RMD distribution late in 2024 for 2024?
After filing the 5329’s requesting waiver of the penalties how does Jacob pay the tax associated with those late RMD’s?
Does the IRS process the 5329’s and send tax notices?
thanks Alan. So a 1040X is required for each year that the RMD was missed? I read that a 104X was only required if there were other changes to those tax years?
The instructions for Form 5329 indicate that the 1040X is needed, although poorly written. You could file the 5329 by itself and sometimes the IRS will accept it. In other cases, they will return the forms to you and request the 1040X with the 5329.
Functionally, there is no need for the 1040X, but the IRS seems to differ.
Thanks Alan! I have a client that needs to do ’21 ’22 ’23 and ’24 inherited IRA RMD’s. Should he make (1) RMD for all 4 years or (4) RMD’s or (3) RMD’s plus the current year RMD?
My reasonable cause explanation is that client thought the Secure Act of 2019 meant he could take RMD’s over 10 years. In addition, Covid and the new Secure Act rules were not completely in place until this August, 2024.
Do you think those reasonable cause answers will fly?
Jim
Alan,
thanks for responding. Does my client need to make separate RMD’s for 2021, 2022, and 2023 all in 2024 to correct this issue? Then make another 2024 RMD all in 2024?
Or does he make one (1) RMD for all the years 2021 thru 2024?
Our reasonable cause explanation will include that the taxpayer thought the Secure Act started in 2019, that Covid rules for RMD’s were changed, and that the FINAL rules were not established until August of 2024.
James Volpe
Permalink Submitted by Alan - IRA critic on Mon, 2024-11-04 15:13
Am not seeing a 10/26 post on that topic.
However, the 2024 RMD can be distributed either separately or at the same time as the delinquent years. The total of all 4 years can be distributed per a single request for the proper amount if he prefers.
The 5329 forms for each delinquent year should be filed with a 1040X for those years. While the 5329 involves only 4 lines, the 5329 instructions should be read regarding completion of each line, because they are not intuitive. The reasonable cause explanation that goes with each 5329 can be brief but should also state that the RMD of $x has now been made up.
2024 taxes due from these distributions are most easily paid by withholding from the distributions taken. A large quarterly estimate paid in January will not erase the underpayment penalty for the first 3 quarters, so withholding is the easier solution because it is applied equally throughout the year.