RMD from closed IRA
We rolled over a client’s IRA into his 401(k) in 2010. Unfortunately, a small amount of cash didn’t get transferred until 2011. Therefore, he has a 2011 RMD of $357, but no IRA from which to take the distribution. What does he need to do to satisfy the IRS?
Permalink Submitted by Alan Spross on Mon, 2011-03-14 21:27
The 2011 transfer included the IRA RMD of $357, therefore the client should report that on line 15 of Form 1040. However, the transfer will be reported on a 1099R with a Code G showing no taxable income, and therefore the client’s 2011 return will need explanatory statements. The $357 then becomes an excess contribution to the 401k plan and needs to be distributed along with any earnings allocated to the $357. This will trigger a 1099R from the plan as well. In order to prevent double taxation, the explanatory statement will have to tie the two issues together to explain that RMD income has already been reported, and therefore only earnings on the 401k excess contribution are taxable. That will result in the $357 only being taxed one time.
Permalink Submitted by J. Illana Weisman on Mon, 2011-03-14 22:13
Thank you, Alan. It is now clear what needs to be done, which is a whole bunch of work regarding a small amount of money.