Calculation of Missed RMD’s from Inherited IRA
For the past 3 years an individual failed to take RMD’s from an inherited IRA. The client has realized the error and now wants to take the missed RMD’s. How does he calculate the amount? Does he take the year-end value each year and divide it by the applicable factor, or can he adjust that year-end value by the amount that should have been taken? I believe he can’t make any adjustment, but would appreciate your word on this.
Permalink Submitted by Alan - IRA critic on Thu, 2017-02-23 21:01
It is rare that the make up distributions done prior to filing the 5329 forms are calculated with a year end value adjustment for the RMD that was not taken on time. Probably best to calculate each year’s RMD by using the actual year end value of the prior year with no adjustments. Adjustment might reduce the chance that the IRS grants the penalty waiver. While not required, it is also recommended by expert Natalie Choate to request a separate RMD check for each dilinquent year with withholding declined so that a clean case can be presented to the IRS with the 5329. Also, carefully review how to fill out the 4 lines on the 5329, as completion is not intuitive. Adhere carefully to the instructions for those lines described in the last page of the 5329 Inst.