Interest on RMD penalty
When fililng Form 5329 to report a late RMD, Ed recommends that you do not pay the penalty with the form. Rather, add a letter of explanation and request a waiver. In Module 26 of The Special Issues Care Solution, it provides that if the penalty is not paid with the form and the IRS denies the waiver and assesses the penalty, “the client could owe interest on the penalty payment.”
Does anyone know how the interest is calculated? From the date the form is filed or from the date the penalty would have been first due (the Jan. 1st following the year in which the RMD should have been taken)?
Thanks
Permalink Submitted by mk foss on Mon, 2009-01-12 01:41
Interest on a missed Form 5329 penalty accrues beginning April 15 of the year that follows the year that the penalty is incurred. That would be 4/15/09 for a 2008 penalty.
The IRS has been very cooperative in waiving the penalties. One condition of the penalty waiver is that all missed RMDs have been withdrawn from the IRA – I think they’d rather have the income tax on the RMDs than penalize elderly taxpayers who missed a distribution.