questions on multi-year missed RMD for inherited IRA

Submitted by n d on Fri, 2022-08-26 15:11

I have been diligent in research, but i’ve come to the need of clarification on a few topics.

History:
I inherited as non-spouse Fidelity Deere/SIP IRA in 2005. Initially my rollover IRA was one account, until split in 2009 into 1 larger managed account and 1 smaller un-managed accounts. The smaller un-managed was only FDRXX (cash) and DE (Deere & Co). (As an employee of Deere, Father took option to have “stock” in Deere.) I received RMD’s regularly from Fidelity, but in 2011, the larger managed account was moved to Valic and the smaller was not moved. I recently found that i have not received RMD’s from Fidelity since the 2011 move. I’m assuming that Fidelity did not calculate any RMD from the smaller un-managed account, and maybe only calculated & paid from the larger managed account. Valic has continued to pay RMD’s as expected since 2011.

So now I have assumed responsibility to repair RMD’s for the smaller un-managed Fidelity account. I know i will have to fill multiple form 5329 and a letter of request for forgiveness.

Question #1: Should i assume to start form 5329 from year 2009 tax-year when the account was split, or 2011 tax-year when the larger account was moved to another broker?
Question #2: With each and every 5329, do i send a separate Letter for Request of Forgiveness, or send one letter for the lot?
Question #3: Since my taxes for each year DO NOT change, logic and some resources say i do not need Amended Return (1040-X) for each year; However, form i5329 wording is confusing and possibly incomplete. Do i presume correctly that because my prior years’ incomes do not and has not changed, then i do NOT send Amended returns and 1040-X for each year of missed RMD?

I have found 2014 though 2021 form 590-B. In which 2021 590-B changes the Life Expectancy tables.

Question #4: Do i use prior years’ 590-B Life-Expectancy tables for years 2009 through 2020, or should i use 2021’s table for all years?

in Form 590-B, for Table I, it states “After the first distribution year, reduce your life expectancy by 1 for each subsequent year.” However, each and every RMD Calculator, including those listed as Inherited IRA RMD Calculator, do NOT do this.

Question #5: Do i or Don’t I subtract the Number-of-years-since-death from my Life expectancy values?

Thank you very kindly in advance,
-n

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Permalink Submitted by Alan - IRA critic on Fri, 2022-08-26 16:26

You should attempt to determine when the RMD shortfall actually began, and you will need the prior year end balance of each account to calculate the correct RMD. If father was the original owner (not a beneficiary himself) of these accounts, the total RMD can be taken in any combination from the two accounts, but it sounds like the smaller account RMD was never actually completed. 2009 RMDs were waived, as were 2020 RMDs so there is no shortfall for those 2 years. Your initial divisor is based on your age at the end of 2006, and you do not enter the RMD tables again until 2022. The 2006 divisor is reduced by 1.0 for each year thereafter, including 2009 and 2020 when there were no RMDs. Your 2010 divisor would therefore be 2.0 less than your 2008 divisor.
Since the explanation will be the same for all shortfalls, you can use a single letter if you decide to file the 5329 forms alone without a 1040X. You could send in all the 5329 forms together with that explanation.
You are correct that the need for a 1040X with each 5329 is not clear and the wording is confusing. Over the years the IRS usually accepts the 5329 by itself, but any particular examiner could choose to return them to you with a request for a 1040 X with each. The 1040X serves no functional purpose or need, but the IRS could ask for it nonetheless. Up to you whether you send in the 5329 forms alone or with a 1040X. Again, you do not need the 590 B tables because until 2022 you just reduce the prior year divisor by 1.0 and do not need to access the tables.
The tables were changed effective in 2022, not 2021, although they were originally intended to take effect in 2021, and that changed with Covid. So for 2021, just use your 2019 divisor less 2.0. These divisor reductions are not reflected in any particular table. You do the divisor reduction on your own.
See above. Subtract 1.0 for each year through 2021. The new tables take effect in 2022, and you must “reset your divisors one time to reflect what they would have been under the new tables. To do this use the new table to determine what your initial divisor would have been for 2006 under the new tables. Then subtract 16.0 from that divisor for you 2022 beneficiary RMD divisor, then resume the 1.0 reductions from there for 2023 and beyond.