Stolen IRA Funds Hypothetical
An unauthorized total withdrawal of an individual’s [bank] IRA has left a seventy-four year old taxpayer without funds to either satisfy his current RMD, nor pay the tax that would otherwise be due on it.
As the bank’s investigation of the pilfered account is expected to drag on and as extensive litigation will likely ensue, we would appreciate your insight as to how the IRS might treat such a scenario and what course of action the taxpayer should take. Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2019-04-23 20:27
The taxpayer’s RMD is the least of his problems when the entire balance is missing. The IRS will only react to 1099R forms, so if no 1099R is issued the IRS will not be involved for quite awhile. The individual will certainly be able to get the penalty for a late RMD waived. But there is a big difference between a problem with just his account and one that involved multiple bank customers. If the FDIC becomes involved it’s an indication of a deeper problem. The first thing to do is wait for the bank to look into this issue, but eventually he may have to retain an attorney. If he gets a 1099R for distributions he never received, then he may need an EA to deal with the IRS who will be looking for the taxes on any distributions, RMD or not.