Beneficiary IRA
Clients mother died in 2008. Son is beneficiary and took her RMD for 2008. The 5 years will expire this month. Can we go back and do A STRETCH FOR THE LAST 5 YEARS? Also what IRS forms need filing and would the last 5 years be all at once. It’s my understanding that there will be a 50% tax in addition to the regular FIT?
Permalink Submitted by Alan - IRA critic on Tue, 2013-12-17 21:31
It might be possible to get the penalty waived. Client should determine what the year end balances were in 2009-12 and calculate and withdraw the RMDs. They will be taxable in the year of distribution. RMDs were waived for 2009, so the first RMD year is 2010. Form 5329 should be filed for each year requesting the penalty waiver for “reasonable cause” for 2010-12. The IRS letter ruling that allowed restoration of the life expectancy stretch was 2008-11028, and in that ruling the taxpayer had to pay the 50% penalty each year. However, there is no harm done to request the waiver and client probably has a decent chance of the IRS waiving the penalty since the client is self correcting the shortfall. The “reasonable cause” for the omission should be given some thought.
Permalink Submitted by Paula Turner on Wed, 2013-12-18 00:36
My friend and her sister were beneficiaries on their dad’s Ira. He was 74 and passed this year. He only took a portion of his distribution for 2013. Our form does not allow to take distribution from deceased persons Ira. Are there any tax advantages/disadvantages from taking distribution for this year from the beneficiary designation Ira that we transferred trustee to trustee from old firm? Could she have taken distribution from the Ira in her dad’s name? What is the difference tax wise?
Permalink Submitted by Alan - IRA critic on Wed, 2013-12-18 03:41
The two sisters can complete the year of death RMD in any combination between them and could have taken it from the prior IRA or from the new inherited IRAs. Either way the distribution must be reported and taxes paid by the beneficiary that receives the distribution. It could not be taken in Dad’s name.