Multiple year missed RMDs
An attorney referred me a new client. The heirs of a deceased taxpayer. Taxpayer was 79 with Alzheimer’s disease. He passed away in 2015. Unbeknownst to anyone, so I’m told, was the fact he had a $1,000,000 IRA. He did not take one RMD from it. In fact he did not file a tax return for the last 10 years because his only reportable income was a small pension and social security benefits.
I’m looking for any advice on how to proceed here. The easy answer is to compute the cumulative RMDs owed since age 70 1/2, distribute that amount to the named beneficiaries (I think)or his estate, calculate the 50% penalty and estimated interest, and file a 2015 tax return for him to remit the penalties and interest and perhaps taxes owing on the missed RMDs. I’m not sure here.
If anyone else has come across a similar situation your thoughts and advice would be greatly appreciated.
Thank you.
Permalink Submitted by Jose Morales on Fri, 2015-07-31 15:01
If you are going to withdraw the missed RMD amounts and add them to the estate’s reportable income for 2015 then it is worth a shot to seek a waiver of the 50% penalty. You will report the missed RMDs on form 5329, on which you will also calculate the tax penalty for these missed RMDs. There are instructions for this form that walk you though how to ask for a waiver. I would imagine the person having Alzheimer’s is a pretty good excuse for not having taken their RMDs. Be sure to also state that upon discovering the error steps were taken to correct the issue by withdrawing the missed RMD amounts. Also be sure that the beneficiaries absolutely do not forget to take the client’s RMD amount for 2015!
Permalink Submitted by [email protected] on Fri, 2015-07-31 16:41
I understood the heirs are responsible for current year RMD if not taken by owner, but not prior year RMDs.