Charitable Deduction for Beneficiary IRA
I have a 44 year old client that has a beneficiary IRA that she did not take her RMD during 2010. With the extension of the Charitable Deduction for RMD’s until 1/31/11, could she utilize this deduction or does it not apply to inherited IRA’s?
If she can’t still satisfy the RMD through the QCD, should I recommend she take the 2010 RMD now and prepare her for the 50% penalty?
Permalink Submitted by Anonymous (not verified) on Mon, 2011-01-17 16:54
Unless the law changed recently, you must be 70.5 or older to qualify for the QCD. Since she doesn’t qualify for the QCD, she should immediate request the 2010 RMD and request the penality be waived if there was a legitimate reason for not taking the RMD in 2010. The waiver request should explain what happened and ask that the 50 percent penalty be waived. The penalty is reported on Form 5329 and the waiver request must accompany Form 5329.
Permalink Submitted by mk foss on Tue, 2011-01-18 22:35
I agree with the information posted above but wanted to give a little more information.
The Form 5329 with the waiver request can be attached to the 2010 Form 1040. That’s the preferable way to handle it. The RMD will be taxed in 2011 but the waiver request 5329 must be filed for the year the payment is missed. The IRS has been very generous in granting waivers – but the missed RMD must be withdrawn before you request the waiver. The fact that no RMDs were required for 2009 and that starting up again in 2010 was confusing may be a sufficient reason for IRS to grant a waiver.