Custodian erroneously advised client of a larger amount on his RMD in 2022.

Submitted by Al Figliolia on Tue, 2023-03-21 14:58

Please advise if there is a way to resubmit updated tax return and therefore ,refund client over payment of Federal taxes for 2022 ?



Submitted by Alan - IRA critic on Tue, 2023-03-21 15:42

  • Are you referring to a direct compensatory payment to the client or to the IRS late rollover self certification mechanism? The latter is outlined in Rev Procedure 2020-46 as linked below.  The client would review and complete the self certification form and check the first reason (financial institution error) and the custodian would have to accept the form and a rollover contribution of the gross excess RMD that was distributed. Note that the one rollover limit applies, so if client does not have a rollover available, this will not work.
  • Microsoft Word – rp-20-46.docx (benefitslink.com)
  • Unless the excess is significant, the client should probably pass on the above procedure. Custodian acceptance of the form with the rollover money will just increase future RMDs, and custodian acceptance is subject to IRS review. The longer the elapsed period since the excess RMD was distributed over the 30 day safe harbor period (ie 90 days from the distribution date), the more likely the chance of the IRS contesting the late rollover. Finally, if the custodian accepts the late rollover, they must complete Form 5498 correctly using Boxes 13a and 13c which indicate a late rollover contribution. And if this is accepted after the 2022 return was filed, the 2022 return will have to be amended for a refund.

Submitted by Al Figliolia on Tue, 2023-03-21 18:37

The custodian advised that the RMD for 2022 was for $ 187,000 ,instead it should have been for $147,000.The client had the custodian withhold 33 % in Federal taxes Is there a way to file an amended tax return and thereby have the taxes ,that were overpaid ,refunded to the client?  

Submitted by Alan - IRA critic on Tue, 2023-03-21 18:49

Yes, see first bullet point above. A late rollover of 40,000 via the self certification form due to financial institution error would allow a 1040X to be filed showing a 40,000 rollover that would reduce taxable income by that amount and a refund for the additional taxes paid would be issued. If the 2022 return has not yet been filed, an extension should be filed unless the custodian will accept the late rollover quickly.

Submitted by Al Figliolia on Wed, 2023-03-22 14:49

This was not a rollover it was a RMD ,that was miss calculated and taken ,in 2022. 

Submitted by Alan - IRA critic on Wed, 2023-03-22 15:35

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