RMD for IRA-BDA
My clients RMD amount is calculated as $8,323.69 & he has taken out $8,323.68. My back office seems to think that even if he is a penny short he could be penalized. Do you know if the IRS looks at this to the penny or rounds up to the dollar?
Permalink Submitted by Bruce Steiner on Wed, 2012-12-19 00:28
The penalty is 50% of the shortfall. If they send him a bill for 1/2 cent, he can pay it. Since 1/2 cent coins haven’t been issued since the 1850s, he would have to pay a full cent. Actually he wouldn’t have to pay it since the IRS doesn’t require payments of amounts due that are under $1.00 (nor will they refund overpayments under $1.00 unless the taxpayer specifically requests the refund). If he’s concerned, he could take a distribution of the remaining cent, preferably by electronic transfer or cash withdrawal to avoid the expense of dealing with a check.
Permalink Submitted by mk foss on Wed, 2012-12-19 01:50
Both IRS and most tax preparation services round all amounts. Based on the required reporting from the custodian to the IRS – there would be no panalty assessed. Bruce is correct as usual.