No distributions taken on an inherited ROTH IRA
I have a client who inherited a ROTH IRA from his 87 year old mother in 2007. He rolled it over into an inherited IRA, but he never took any distributions from it (for 10 years).
We understand the rules that he should have either taken annual RMDs starting in 2008 (the year following the year of death), or distribute the entire balance by 2012 (5 years after the year of death).
What should he do at this point?
This client would like to take a distribution in 2017 in the amount of all of the RMDs that he should have taken to date, start annual RMDs going forward and ask for a waiver on the tax return form 5329. Do you think this is a way to go? Or, should he consider distributing the entire balance of the account in 2017?
Permalink Submitted by Alan - IRA critic on Sat, 2017-12-02 17:17
While 10 years is a long period of time to re establish the life expectancy stretch, there is a decent chance that if client figures each RMD (would need prior year end balances) and brings the shortfall current and files a 5329 for each year requesting the penalty waiver the IRS will accept that. Even under the 5 year rule, he is late so would need a 5329 either way. Therefore, the risk of a penalty is about the same either way. Remember that 2009 RMDs were waived so no need for a 2009 5329. RMDs after 2009 are figured using the same divisors as if 2009 was an RMD year, but actual year end account balances are used.