missed required distribution process?
If someone missed a Required distribution, how to file that on their tax return? It was requested mid December, but custodian didn’t get it processed until Jan 4th. Should the taxpayer:
#1 write a letter of explanation with their 2022 tax return showing / explaining that it was requested, but not processed before year end, but it has been taken out now.
#2. should they file a 5329 and claim the income in 2022 even though there will be no matching 1099-R
#3 just file it on their 2023 return (along with their 2023 RMD), and attach a copy of the letter again with their 2023 return. The 1099-R’s would then match what actually happened.
In a case like this, i haven’t seen the IRS enforce the 50% penalty since the taxpayer was trying to follow the rules. Is that what you have seen as well?
Permalink Submitted by Alan - IRA critic on Thu, 2023-01-19 19:34
Yes, the IRS routinely waives the penalty for missed RMD when made up and self reported by the taxpayer on Form 5329 with a statement indicating the “reasonable cause” for the delinquency. The late RMD will be taxable in the year distributed (2023) along with the 2023 RMD. The 5329 and request for penalty waiver can be filed with the 2022 tax return, and the late RMD made up before filing the 5329. Only 4 lines of the 5329 need be completed but the entry is not intuitive, so taxpayer should carefully read the 5329 Inst for Part IX.