IRA and 403(b) inherited–RMD not taken

Submitted by alberto vega on Wed, 2018-11-07 00:45

Daughter age 51 inherits IRA at a bank in Sept 2016 (date of death of mother, age 86) value $ 27,000 and 403(b) plan of mother, balance $83,000= total $110,000 as of 12/31/16. Mother took RMD for 2016 before death. Saw mother tax return for 2016 they treated the 403 b distribution as an IRA distribution in addition to the IRA distribution from bank
Daughter did not take RMD for 2017 ( using her own life expectancy) and has not taken the 2018 distribution yet.

1. Should daughter take 2017 RMD based on 12/31/16 balances and 2018 RMD based on 12/31/17 balances but separately from bank IRA and 403(b) plan?
2. Thereafter then file a FORM 5329 to ask for forgiveness of 50% penalty for 2017 distributions not taken. But what language should be included to ask for the waiver of the penalty.
3. Should FORM 5329 be filed now or with the 2018 tax return?



Submitted by Alan - IRA critic on Wed, 2018-11-07 03:02

  1. Yes, the RMDs for each plan must be separately distributed. You are correct about the year end balances.
  2. She will likely have the waiver granted even if she simply states that she overlooked it, did not know it was required, etc. But she must make up the 2017 RMD before filing the 5329.
  3. The 5329 should be filed as soon as the late RMD has been made up.
  4. Not sure what you meant by mother’s 2016 return treating the 403b distribution as an IRA distribution. This is not likely to cause a problem, but if it does, an amended 2016 return will have to be filed by the executor. I assume the total RMD was correct, but was all reported on line 15 instead of 15 and 16.

Submitted by alberto vega on Wed, 2018-11-07 08:10

They reported both distributions from IRA and 403b on line 15a and 15b.  You indicate IRA should be reported on lines 15a and 15b, and 403b on lines 16a and 16b?

Submitted by David Mertz on Wed, 2018-11-07 13:40

Correct.  (If the taxable amount is the entire distribution, the amounts should have been only on lines 15b and 16b with 15a and 16a blank).  The new 2018 Form 1040 will have both types of distributions combined on the new lines 4a and 4b, I suspect that because so many people have put these distributions on the wrong line in the past.

Submitted by alberto vega on Fri, 2018-11-09 01:34

Therefore lines 52 to 55 of FORM 5329 are the ones to be completed to request the IRS forgiveness of the penaltyfor not taking the distribution timely in 2017.  Where in this FORM do you place the wording for asking forgiveness

Submitted by Alan - IRA critic on Fri, 2018-11-09 01:59

The request for the waiver would be done on a separate statement attached to the 5329.  As for those 4 lines on the 5329, they are not intuitive so the last page of the 5329 Inst should be read before filling out the form.

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