401k rolled over into IRA, needs an RMD
A question to me from another CPA who has a client, BD 02/06/1936, rolled a 401k into a traditional IRA on 11-25-2008. What options does the client have for taking any RMD?
Thanks
A question to me from another CPA who has a client, BD 02/06/1936, rolled a 401k into a traditional IRA on 11-25-2008. What options does the client have for taking any RMD?
Thanks
Permalink Submitted by Al Fry on Wed, 2008-12-10 16:42
Hopefully, the RMD for the 401(k) was taken and not rolled into the IRA, since it was not rollover eligible.
Permalink Submitted by Alan Spross on Wed, 2008-12-10 19:58
If client was still working for the employer with the 401k, there is normally no RMD requirement from the plan. If the plan provisions require on at 70.5 even if still working, that RMD can be rolled over to an IRA because it is not a statutory RMD.
BUT – if the client was retired, then the plan should have held back the RMD from the rollover as Al Fry indicated. The first thing to do is to check if that was done. If it was NOT done, the RMD is still considered to have been distributed, and the client should report the income on line 16 of Form 1040. In addition, the RMD amount that was transferred to the IRA in error needs to be corrected using excess contribution procedures. In that case, the IRA custodian should be advised that the RMD portion of the rollover is to be treated as an excess contribution, an earnings calculation needs to be done and the net amount distributed from the IRA. The 1099R coding should be that of an excess contribution distribution. Any positive earnings are taxable on line 15b.
Permalink Submitted by Rodney Skelton on Thu, 2008-12-11 15:38
The client is still working for the employer, and the 401k company did check and states the client is active and that a RMD was not necessary at the time of the rollover. The 401k company has provided the 12/31/2007 balance. Should the client proceed with the RMD?