2009 RMD: IRA Holder’s Distribution in Error
How should a financial organization treat a scenario where an IRA holder has a monthly RMD withdrawal and determines after the withdrawal that he/she wants to rely on the 2009 RMD suspension relief?
Clearly, regulation ONLY allows for one IRA rollover into another once per 12 month period; however, we will encounter circumstances later in 2009 (after several different distributions have occurred) that the IRA holder sends the financial organization money and says “Just reverse it!”
Permalink Submitted by Bruce Steiner on Thu, 2009-01-15 17:49
Call them before January 31st and explain it to them so this doesn’t happen.
Permalink Submitted by [email protected] on Fri, 2009-01-16 20:27
I appreciate your suggestion! While that may be a solution (maybe impractical, though), I am trying to look forward and determine a “best practice” that is both practical and doesn’t deviate from the “spirit” of the relief. Regardless of whether I call thousands of IRA holders that would have been subject to an ’09 RMD, it is inevitable that we will encounter the scenario described above.
Permalink Submitted by Alan Spross on Fri, 2009-01-16 21:01
See “IRA Reporting” section in the attached link. This is what the IRS recommends be done.
Note that the recommendation hinges on whether the 5498 can be corrected prior to mailing to eliminate the RMD check or not. Most institutions will probably end up sending a letter to IRA holders where an RMD is required.
Quite a few of these clients will actually need the funds to live on and probably some in excess of the RMD. It would be a good idea to mention the ability to roll one distribution back within 60 days, but also to re state the one rollover limitation so no one gets the impression that they can collect several months, combine them and roll them back. Each separate distribution is counted as a rollover of rolled back, so a taxpayer can only roll one distribution back.
http://www.irs.gov/pub/irs-tege/rne_se0109.pdf
Permalink Submitted by Al Fry on Sat, 2009-01-17 00:14
Actually, I received a 5498 yesterday. Unfortunately, it doesn’t tell us anything, since it is a Roth.
Permalink Submitted by Al Fry on Sat, 2009-01-17 00:18
With all the publicity on the 2009 skip, I’m sure most over age 70 1/2 know about it. Many are brighter than some of those front line people mentioned, in this regard.