Missed RMD
A person is completely mentally incapacitated in 2015. He has a principal under power of attorney starting in 2013. He made his six-figure RMD in 2013 from two separate custodians. For 2014, he only made a substantial five-figure RMD from only one of the custodians, failing to take over $80,000 from the other custodian. His principal signed both his 2013 and 2014 return. At the end of 2015, the principal discovered the fact that the 2014 RMD was not taken in full. The principal has, in 2016, cause the distribution of the remainder 2014 RMD plus earnings. In what year should the 2014 RMD plus earnings, paid in 2016, be reported? For what year should Form 5329 be filed? Is there any precedent for the IRS waiving the 50% penalty for not making an RMD for total mental incapacity of the account owner, even though he was relatively newly represented by a principal under power of attorney? Is there much precedent for the IRS waiving the penalty?
Permalink Submitted by Alan - IRA critic on Thu, 2016-03-31 18:44
IRA distributions are always reported as income in the year received, and the 1099R also reports in that manner. Mental or physical incapacity will almost surely result in IRS acceptance of the waiver request. A 5329 requesting the penalty waiver for reasonable cause should be filed for 2014 and 2015 and the request should state the reason for the shortfalls and that those shortfalls have been made up in 2016. The POA should not compromise the waiver approval.
Permalink Submitted by William Koch on Thu, 2016-03-31 22:25
Thank you very much for your reply.