2011 IRA Withdrawal Processed in 2012
I have a new client that has an inherited IRA. She made her 2011 RMD request in late December, but it was not processed by the custodian until the first week of January 2012. As she did not receive a 1099 for 2011, is there anything that can be done to prevent her from having a 2011 penalty for a non-withdrawal. Please advise.
Thanks,
Captain Harry
Permalink Submitted by Alan Spross on Wed, 2012-04-11 21:53
Yes, she can file a 5329 with her 2011 return explaining what happened and asking the IRS to waive the penalty. The IRS will probably grant the waiver.
However, there is nothing that can be done about the fact that she will have two RMDs taxable in 2012.
Permalink Submitted by Alan Spross on Sun, 2012-04-22 03:35
There actually is an additional factor to be considered here.
Under IRS Sec 7503, if the date by which a taxpayer must perform some function falls on a weekend or Holiday, the taxpayer has met his obligation if the function is completed on the next business day.
In this case 12/31 was on a Saturday, 1/1 Sunday and 1/2 was the New Year’s Holiday. Accordingly if the RMD was distributed on 1/3/2012, it was distributed in time.
It will still be reported on a 2012 1099R and is reportable in 2012, but would not be delinquent. Even if the distribution date was 1/3, I would still file the 5329 in the usual fashion as this is more expedient, however if the IRS denied the exception (highly unlikely) and the client has evidence of the 1/3 distributions, the client could cite Sec 7503 and provide evidence of the date of distribution and the IRS could not levy the 50% penalty.
Permalink Submitted by Denise Appleby on Fri, 2012-04-27 11:02
It does not appear that § 7503 applies RMDs. In cases where December 31 falls on a weekend or public holiday, the deadline is rolled back to the last business day in the year ( December 30 in this case). I would go with Alan’s original response