Inherited IRA’s from 1995, never took an RMD
I met someone who inherited an IRA from her dad in 1995 and has never taken an RMD. What steps does she need to take? Will there be any penalties?
I met someone who inherited an IRA from her dad in 1995 and has never taken an RMD. What steps does she need to take? Will there be any penalties?
Permalink Submitted by Robert Vashko on Fri, 2020-09-11 16:26
That account should have been emptied 10 years ago. Since it wasn’t, it should be emptied ASAP, and there will be a 50% penalty due on the entire amount, as well. Factor in income taxes and she will receive very little in the end.It has been suggested (here and elsewhere) that she could try taking out as a lump-sum what she should have taken out as stretch distributions since 1996, pay the tax and penalty on that amount, then continue taking stretches as scheduled going forward, and hope the IRS lets it slide.Some have suggested writing a letter to the IRS to explain the situation (“I am financially unsophisticated and had no guidance as to what I should have done”). Others have said skip the letter, avoid poking the bear, hold your breath, and hope you don’t get a letter in the mail demanding full taxes and the 50% penalty on everything.But it has been so long, I’m unsure if the IRS would give her a mulligan on this (assuming they ever took notice in the first place).