RMD not taken in 2010
I realize there is a 50 percent penalty for not withdrawing. in the year 2010. How soon will the IRS go after this 50 percent penalty.
Would appreciate all your comments to assist my client.
Thanks for expediting !!!
I realize there is a 50 percent penalty for not withdrawing. in the year 2010. How soon will the IRS go after this 50 percent penalty.
Would appreciate all your comments to assist my client.
Thanks for expediting !!!
Permalink Submitted by Jose Morales on Mon, 2011-04-25 16:34
The IRS expects the individual to report a missed RMD on form 5329 when they file their taxes for that particular year and pay the 50% penalty when taxes are due. If you are asking when the IRS will come after the individual if they simply do not report that they didn’t complete their RMD, it depends. I’ve noticed that those that file electronically are contacted by the IRS for any discrepancies fairly quickly, within months of filing. It used to be that you wouldn’t hear from the IRS for 2 to 3 years.
Permalink Submitted by mk foss on Mon, 2011-04-25 17:34
The IRS has been very good about waiving this penalty. In order to have the penalty waived, the individual must take the payment out in 2011, complete Form 5329 revealing the amount of the penalty and ask for a waiver. The waiver request must say that the missed payment has been withdrawn and give a reason for failure to take it on a timely fashion. I think that many people were confused becasue no withdrawal was required in 2009; I’d suspect that reason will be cited by many requesting waivers in 2011.
Permalink Submitted by Laura Derderian on Tue, 2011-05-03 14:24
I also have a client who did not take their inherited distribution in 2010, lots of good info here, my question is: what should be included in that letter asking for the waiver, it sounds like you need to know exactly the right thing to say and do!
Permalink Submitted by Alan Spross on Tue, 2011-05-03 16:54
The letter should be concise. Some situations that the IRS has accepted to waive the penalty include:
1) Major health issues of the taxpayer, spouse or children living at home
2) Confusion following the RMD waiver of 2009
3) First RMD for inherited IRA and did not understand the RMD requirement
It is also helpful to take the delinquent RMD and send a copy of the statement from the IRA custodian showing that distribution.
Again, the letter should not be more than one paragraph long. Try not to show more than two reasons to justify the request. The actual instructions to follow in completing the 5329 are on p 6 of the 5329 Instruction booklet.
The income from the RMD should be reported on the return for the year the distribution is taken, NOT in the delinquent year, but the 5329 edition should be that of the delinquent year.