Single life expectancy table for inherited IRA
My friend died in 2008 and I was the sole beneficiary her on one of her IRAs. (She was over 70 1/2, but had not taken her RMD for that year. I took that RMD for 2008 based on her age at death.) I learned that the RMDs for inherited accounts are based on the age of the beneficiary in the year following the owner’s death and Table 1 (single life expectancy) should be used. Thereafter that factor is reduced by one for each succeeding RMD distribution year. Accordingly, in 2009 my factor would have been 17. In 2009 distributions were waived. In 2010 I took my first distribution based on my age. The amount was figured out by the financial institution (something they were reluctant to do). Now that I am figuring out what the RMD should be for 2011, I think they made a mistake in 2010. Instead of using the factor of 16, they used 16.3. That is they looked at the single life expectancy table and calculated for the age I was in 2010 and used that factor 16.3, rather than 16 (17-1). I rather doubt that since RMDs were not required for 2009 the factor used would be my age two years after my friend’s death. The RMD for 2011 should be 15 (17-2). Am I correct?
Permalink Submitted by Alan Spross on Fri, 2011-12-02 00:21
Yes, you are correct. There is no permanent age adjustment due to the 2009 RMD waiver. Your 2009 divisor would have been 17 had an RMD been required. For 2010 16, for 2011 15 etc.
Therefore, for 2010 you fell short if you used 16.3. Technically, you should remove that additional amount this year in addition to your 2011 RMD. If you file a 5329 for 2010 asking the IRS to waive the penalty for “reasonable cause”, and explain what happened including your corrective distribution, they are almost sure to waive the penalty. Moreover, the 5329 establishes a 3 year period after which the IRS cannot somehow discover this error many years later and charge penalty plus interest.
Or – the difference may be so small you can just forget about it.
Permalink Submitted by BARBARA ROSEN on Fri, 2011-12-02 15:55
Thank you Alan for your crisp reply. You’re right: the difference is small ($59.32). I’m inclined to forget it.
Barbara