2010 RMD Question – Forgot Account When Calculating
Hello,
I helped a client calculate their 2010 RMD before 12/31/2010 and later learned that they forgot to tell me about one account. What can/should we do about this. The missing account is about 7% of the client’s total IRA value. The client has not yet filed their 2010 tax return.
Thanks,
R.
Permalink Submitted by Alan Spross on Mon, 2011-03-28 04:49
Client should take the delinquent RMD amount ASAP. For the 2010 return, only the amount actually distributed in 2010 will be reported and taxable. But Form 5329 should be added if the client wishes to request waiver of the excess accumulation penalty. Follow the instruction on p 6 of the 5329 Instructions to request the penalty be waived. Client can state that the error was corrected as soon as discovered. The IRS has been quite lenient in granting the waiver, so it is worth the effort to ask and there is no direct cost.
Both the makeup RMD amount and the regular 2011 RMD will be taxable in 2011.
Permalink Submitted by mk foss on Mon, 2011-03-28 17:27
Alan has explained the best way to handle this. I wanted to add a few additional points.
If the return had previously been filed, you can prepare From 53269 and a waiver request and send it to the IRS. They have waived all penalties when this is done but as Alan mentioned, the penalty cannot be waived if the funds are not withdrawn.
The statute of limitations on the potential 50% penalty does not start to run until Form 5329 is filed – so you should avoid any feelings of “letting sleeping dogs lie”