How withdraw and report an RMD for 2021 decedent in a Beneficiary/Inherited IRA subject to 10 rule
Background: Father died in early 2021 so only withdrew a fraction of the RMD amount. He had a custody Keogh account with a brokerage firm. Father was the only participant and administrator of the Keogh and filed a EZ-5500 each year. Calculated his own RMD and withdrew at least that amount every year. He never filed a 1099R but always reported the amount as retirement income. The Keogh passed equally to 5 daughters and was distributed 20% to each as an Inherited/Beneficiary IRA, subject to the 10 year withdraw rule. Each should receive a Form 5498 from their respective brokerage firms.
Questions: Should each beneficiary withdraw their 20% of the remaining RMD amount in 2021? If so, how report it on their tax return? How will the IRS know it is in fulfillment of the RMD? Do we need a 1099R and where is it generated from as the brokerage firms would not provide that? Also, is there a Form to file to generate the 1099R?
Thank you to anyone who can answer these questions.
Permalink Submitted by Alan - IRA critic on Tue, 2021-08-03 15:10
The year of death RMD can be completed in any combination by the beneficiaries, and in many cases a single beneficiary wants to withdraw enough to satisfy the entire RMD. They will each receive a 1099R for any distributions they take. The IRS seldom inquires about the math since they do not have a program to oversee inherited IRA RMDs. Therefore, the 5 year daughters (or the ones that take distributions in 2021) should document and retain some evidence of the amount father withdrew of his RMD, and which beneficiaries combined to satisfy the remainder. If there were any other IRAs with different beneficiary combinations, please advise as that presents complications to this process.
If any of the daughters are not cooperative, the others will be safe if they withdraw at least their 20% share. The IRS has never come after a beneficiary for more than their share if another beneficiary fails to take their share.