RMD eligible for 60 day indirect rollover?
Wrong tax withholding amount was taken on a 2021 RMD for a client. Is it possible to return the RMD back to the IRA via 60 day indirect rollover and re-process it with the correct withholding amount? If this is not possible, then the client will have to make an estimated tax payment directly to the IRS?
Thank you for all your help.
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-07 23:28
Since an RMD is never eligible for rollover, this distribution cannot be returned for re-issue. If client will not meet his safe harbor (eg 100% of 2020 tax liability or 110% of current year tax liability if less), he will be subject to an underpayment penalty for the shortfall. But since the underpayment interest rate is low, if the shortfall is also low, he might choose to just pay the penalty if the IRS even bills it.