RMD
Client age 78 had a automatic RMD calculation established with a fund company since 1998. January of 2006 client was convinced to transfer her accounts to an insurance company. Within the free look period we were able to have 100% of the funds transferred back to the fund company with the same account number. My client called today because she received a letter (she thinks) indicating that she should set up her RMD. I called the fund company & found that when her money was transferred out there system shut off the automatic RMD calculation. it is now 2007 & no RMD was taken out for 2006. What if anything can be done to avoid tax penalties on the 2006 distribution & how should it be handled? Thank You!
Permalink Submitted by Alan Spross on Thu, 2007-10-04 21:20
See p 54 of Pub 590.
Take the 2006 RMD ASAP, and file a stand alone 5329 for 2006 with a request to excuse the penalty including reason for the omission. Attach a copy of the statement showing the distribution. Taking the 2007 RMD also would add further credibility, but it is not required.
The IRS has routinely forgiven the excess accumulation penalty in these circumstances.