Excise Tax for Failing to Take RMD
IRA owner died post RBD and named six children as beneficiaries. The IRA was divided into six inherited IRAs before the year of death RMD was taken. Three of the beneficiaries took the year of death RMD and three refused. How is the excise tax for failing to take the year of death RMD applied? Is it against all of the beneficiaries or only on an individual basis against the beneficiaries who did not take the RMD under the separate accounts rule?
Permalink Submitted by Alan - IRA critic on Wed, 2023-06-14 21:40
This is a joint beneficiary responsibility. Usually with this many beneficiaries, there will be one or more that want to take larger distributions than the year of death RMD, absolving the others from taking distributions. But in this case, if the 3 beneficiaries distributed only their pro rated shares of the year of death RMD, while the IRS has not released specific guidance regarding the shortfall, general consensus is that they have not been going after beneficiaries who took out their share. If the IRS actually levied any penalty it is believed that it would only involve those who fell short of their share. It’s hard to know for sure because IRS interest in pursuing beneficiary RMD shortfalls has been almost non existant.