RMD not taken 2013 – 2017
Client has a retirement plan at Vanguard, retired and no longer contributing. Called me and asked why he was getting RMD notices from Vanguard? We were unaware he had any assets at Vanguard. Obtained year-end statements from 2013 – 2017 and confirmed RMD’s were not taken. He and his wife have IRA’s with Fidelity and we have faithfully distributed RMD’s since they turned 70 1/2. The account worth is $120k and the 50% penalties will eat them alive. These clients are the best and I want to do anything to help them. Will the fact that RMD’s were taken on other IRA’s help their case? Thanks for any suggestions.
Permalink Submitted by Alan - IRA critic on Thu, 2018-02-22 19:42
The IRS almost always waives the penalty if the taxpayer makes up the late RMDs and files Form 5329 requesting the penalty be waived. Client would need to file a 5329 for all 5 years using the correct edition, but the same explanation can go with all 5. They can be filed without a 1040X. If client took more than the RMD from any of the Fidelity IRAs, the excess would count toward the total RMD for each year, and if client wanted to take the makeup distribution from the Fidelity IRAs, he could. So first verify that client is actually short in total, and if so calculate the late RMD for each year, then request that amount to be distributed. Client will be taxed on the makeup RMD this year.
Permalink Submitted by Erwin Buck on Thu, 2018-02-22 21:52
Thank you so much, you made my day!