403b to IRA before taking RMD
I have an individual who is currently taking RMDs from retirement accounts. At the beginning of the year, they had both IRAs and a 403b both of which are subject to RMDs respectively. During the year, the individual converted their 403b into an IRA so the accounts could be consolidated. However, they realized that they had not yet taken their RMD from the 403b for 2022 prior to converting to an IRA. What are the options since their is no longer a 403b account that RMDs can be taken from?
Permalink Submitted by Alan - IRA critic on Sun, 2022-12-11 19:28
Because the direct rollover included the RMD, the RMD for the 403b has been satisfied. However, because the RMD cannot be rolled over, the individual now has an excess IRA contribution in the amount of the RMD to be corrected and removed from the IRA. The 1099R from the 403b will show a non taxable direct rollover, but the individual will have to report the RMD amount that was included as taxable and include an explanatory statement with their return. Then the situation must be explained to the IRA custodian (RMD was rolled over), indicating that amount that must be treated as a regular IRA excess contribution that the custodian needs to distribute as adjusted for investment gain or loss. This is not costly, just a reporting hassle.
Permalink Submitted by Brian Bishop on Sun, 2022-12-11 20:33
Thank you so much for the prompt response!