missed RMD
Client moved his ira account from one advisor to another during 2016 and neither took out the RMD. What can be done to cure this problem and avoid the 50% penalty if anything.
The 2016 5329 is to request waiver of the penalty for missing the 2016 RMD. But the make up distribution will be in 2017 and distributions are always taxable in the year distributed. He will get a 2017 1099R and the make up distribution will only be taxed in 2017. Both his 2016 make up distribution and his 2017 RMD will be taxed in on his 2017 1040.
Permalink Submitted by Alan - IRA critic on Thu, 2017-05-04 18:55
Client needs to distribute the missed RMD ASAP, then file a 2016 Form 5329 to request the penalty be waived for “reasonable cause”. There are only 4 lines to complete but they are not intuitive, so the last page of the 5329 Inst. needs to be checked before filling out the form. Because client will have made up the RMD and self reported the error, the IRS will likely waive the penalty.
Permalink Submitted by Richard Wilson on Thu, 2017-05-04 23:47
Will client need to report the missed RMD on his 2016 Form 1040 as income. He will then get 2017 1099R and have to report it again in 2017 or have I missed something.