After 5329s submitted to irs

Submitted by jim p on Tue, 2013-04-23 18:48

I have submitted (by mail) my 5329 forms to the IRS with letter to waive any penalty.I await a reply from the IRS as to waiver of penalty.

Now my question is do I need to make an actual withdrawal for the 5 years from the beneficiary IRA account for the one large sum and make the w/d now? Or is it sufficient to wait until near the end of year to make w/d?

Thank you much.



Submitted by Alan - IRA critic on Tue, 2013-04-23 19:04

  • I am not sure why you filed the 5329. There is never an early withdrawal penalty on an inherited IRA distribution. The 1099R should show code 4 (death distribution) in Box 7 which eliminates the need for a 5329.
  • If you were the designated beneficiary on this account, you can take RMDs over your life expectancy starting no later then the end of the year following the year of owner’s death. If the owner passed prior to the required beginning date, you could elect the 5 year rule. but that is rarely to your benefit. If you inherited through the estate and owner passed prior to RBD, then the 5 year rule is the only option. Under that rule, you have no annual RMD to take but can take distributions each year to spread out the tax liability. The only requirement is that the account would have to be drained by the end of the 5th year following year of death.

 



Submitted by jim p on Tue, 2013-04-23 19:59

Alan,Sorry if I misled you or anyone else.I did not make any RMD’s for 5 years and filed 5329s (see p2 at or near bottom) where the info goes for showing this and what the penalty might be. I sent these 5329’s into the IRS at the recommendation of a Forum person and included a letter asking that they waive any penalty. Hope this clears it up. I still want to know if I need to make these 5 years total RMDs now or can I wait until near year end or by 12/31/13.



Submitted by Alan - IRA critic on Tue, 2013-04-23 20:51

  • OK, the extra info helps. For waiver of the 50% penalty, you have a much better chance if you make up all the missed RMDs before requesting the waivers since this indicates action as well as self reporting the omission. Use the best “reasonable cause” explanation you can. Did the decedent pass before the RBD or after?
  • If it was December, it might have been wise to make up half the shortfall then and the rest in January and then file the 5329. That would split the taxable amount over 2 years. But in April, you should just make up the shortfall. I assume that you want to restore the stretch from this point on, and if so the current year RMD can be delayed until Dec, but you still will have the current year plus the back years  all in 2013 income.

  



Submitted by jim p on Wed, 2013-04-24 23:55

Alan,Thanks again. My subject line above says it all for me.I’ll decide if I want to include current year or wait until Dec.but I doubt it will matter much. Thanks again for your responses.jimee



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