Duplicate RMD Distributions
My traditional-IRA administrator distributed my RMD twice in 2014. I took one out in mid-year and the bank arbitrarily distributed another one in mid-December. They admitted to the problem and took back the second in the form of a roll-over, but not until this year. In the meantime, I have to pay taxes on two RMDs, according to the 1099 I received. What are the tax implications for future RMD distributions? Will I have to go through the extra calculation due to the IRA now including both pre-tax and after-tax contributions?
Permalink Submitted by Jose Morales on Wed, 2015-03-04 18:58
Just to clarify, did the bank withdraw funds from your IRA without your authorization at all? That seems pretty outrageous considering the tax reporting implications of a withdrawal from an IRA and the requirement to present the federal withholding disclosure. Or did you set up an automatic distribution for December and believe that the distribution would be cancelled because you completed a distribution mid-year? If the rollover took place within 60 days you do not have to pay taxes on the full amount withdrawn, only the amount not rolled over (which should equal the mid-year distribution amount). The rollover is not an after tax contribution, although you will have to adjust this year’s RMD calculation to take into account the rollover of a distribution that occurred prior to December 31st and rolled over the following year.
Permalink Submitted by Elizabeth Ehrsam on Fri, 2015-03-06 20:50
Question is the same as Raybod but she did have an automatic “fail safe” which was to be cancelled if she called in with the amount to take out. It had worked for 7 years but this year they went ahead and distributed again in December. She did not notice until after the 60 day window. They admitted it was their fault but say nothing can be done. Is there any help for her?
Permalink Submitted by Jose Morales on Fri, 2015-03-06 21:23
Apply for a waiver of the 60 day rule to allow for a rollover of the funds: http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-relating-to-Waivers-of-the-60-Day-Rollover-Requirement
Permalink Submitted by Elizabeth Ehrsam on Sat, 2015-03-07 23:16
Looks like would cost $500 in user fees since it would not be automatic. I’ll see if she is willing to spend this much.
Permalink Submitted by Bruce Steiner on Sun, 2015-03-08 03:43
The $500 user fee only applies if the amount is under $50,000 (though if it involves a single year’s required distribution, it’s likely to be under $50,000). Otherwise, it’s $1,500 if the amount is under $100,000, or $3,000 if the amount is $100,000 or more. Also there are the legal fees.