RMD not taken prior to IRA owner’s death at year end
The IRA owner died toward the end of year 2011. He had not taken his RMD. What are the rules regarding taking a RMD in year of death, and are there any exclusions for not taking it by year end?
The IRA owner died toward the end of year 2011. He had not taken his RMD. What are the rules regarding taking a RMD in year of death, and are there any exclusions for not taking it by year end?
Permalink Submitted by Alan Spross on Thu, 2012-01-19 21:17
The beneficiary is supposed to complete the owner’s RMD by year end. However, it is normal that this cannot be done particularly with late year deaths.
If not taken by year end, the beneficiary should take the year of death RMD as soon as possible in the following year, and file a 5329 (see p 6 5329 Inst) with their own return asking for a penalty waiver, and sending a copy of the distribution statement for the RMD shortfall. The IRS will almost always waive the penalty in these cases.
If there is a beneficiary, the missing last RMD should always be paid to the beneficiary and not to the estate and is taxable to the beneficiary. If there are more than one beneficiary, the RMD can be taken by any of them for the year of death only.
Permalink Submitted by Julie Brangenberg on Tue, 2012-01-24 16:56
What is sufficient documentation for showing the RMD was taken (printout of account transactions, or monthly statement)?
What if the beneficiary wants to take a full distribution of their Inherited IRA? Should we take the missed RMD first or can we take the full distribution?
Permalink Submitted by Alan Spross on Tue, 2012-01-24 17:48
If the beneficiary wants to take a full distribution, the prior RMDs and current RMD would be included in that single distribution. A copy of the monthly statement would be preferable to a screen print, but that does not mean the IRS would not accept the screen print.
If the account balance is significant, the beneficiary should consider the tax costs of forfeiting the ability to stretch the account through life expectancy RMDs, and also inflating the marginal rate for the distribution year.
Permalink Submitted by mk foss on Wed, 2012-01-25 23:50
As a practical matter, IRS will ordinarily waive the penalty even when no documentation is attached to show how the RMD is calculated. However, this could change and it never hurts to include extra information.
Permalink Submitted by Julie Brangenberg on Fri, 2012-01-27 22:19
Does each beneficiary have to pay the 50% penalty upfront with form 5329, or do they wait and see what the IRS decides before paying the penalty?
Permalink Submitted by Alan Spross on Fri, 2012-01-27 22:55
Do not pay the 50% upfront. The IRS will ask for it in the unlikely event that they do not grant the waiver.
On Form 5329, do not show an amount on line 52 or 53, but enter “RC” and the amount you want waived on the dotted line next to line 52.
Permalink Submitted by Seth Ness on Sun, 2017-12-31 23:14
should the form 5329 be submitted with the tax return for the year the RMD was missed, or for the following year when the late RMD was taken?
Permalink Submitted by Alan - IRA critic on Sun, 2017-12-31 23:56
For the year the RMD was missed, either with the return if not yet filed, or by itself if the return has already been filed. But the waiver request should also not be filed until the late RMD has been made up, so that can be stated on the explanatory “reasonable cause” statement.