701/2 distribution
I have a client who employment was terminated on 12-30-10 birthdate is 10-12-39. He rolled over his 401k to our firm in Feb, the prior 401k custodian did not make a distribution for his RMD. Is he required to take a RMD by April 1st and another for 2011 RMD.
Not sure if Im following the response correctly, the client work past age 70 1/2 employment ended 12-30-10. He rolled over the funds in Feb 2011. If he makes his required distribution by April 1st using the balance as of 12-31-10 of his 401k he will not need to make another required distribution until 2012.
Permalink Submitted by Alan Spross on Wed, 2011-02-16 21:59
Yes, that’s basically right.
But the rollover is considered to have included his 2010 and 2011 RMDs, but since they are not rollover eligible, he now has excess regular contributions to his IRA. This is fairly easy to resolve by removing the correct RMD amounts plus any allocated earnings from the IRA. The 2009 year end plan balance will be needed to figure the correct 2010 RMD. The IRA custodian should be told to consider the excess as timely correction of excess TIRA contributions. The contributions were made IN 2011, so the taxable income for the RMD amount and the earnings will be reported on the 2011 return. The RMDs should be on line 16 since the RMD was distributed from the 401k, but the earnings on line 15b for the corrective IRA distribution. An explantory statement should be added so the IRS understands this reporting.
None of this should affect the 2010 return, since the RBD was not until 2011.