RMD check cancelled in following year due to stale date and owner has died

Submitted by Richard Schieb jr on Mon, 2022-12-12 20:38

IRA owner received 2021 RMD in December 2021. 1099R was issued and taxes paid in 2021. Check was never cashed.

IRA owner died in May 2022. Check was cancelled by brokerage house that issued it due to being stale after six months. Executor just discovered this in December 2022.

How do we get check reissued and who should it be paid to? How do we avoid it being coded as a 2022 RMD distribution.

Brokerage house is saying it cant be done – that is, they have to show it as a 2022 distribution and issue 1099R. Is this correct?



Submitted by David Mertz on Mon, 2022-12-12 22:05

  • It appears that the custodian will be treating the amount of the check as being an amount not distributed, so they’ll need to issue a corrected 2021 Form 1099-R showing a gross distribution equal to the amount withheld for taxes rather than the amount originally shown which included the amount of the check.  This means that the IRA owner’s 2021 tax return will need to be amended to reflect the amount actually distributed in 2021.  (Box 1 of the corrected 2021 Form 1099-R needs to show $0 distributed if there was actually no tax withholding.)
  • The amount withheld for taxes will have satisfied a portion of the RMD.  The remainder of the 2021 RMD along with the IRA owner’s 2022 RMD will have to be distributed to a beneficiary of the IRA and reported on the tax return of any beneficiary who take a distribution of any portion of these RMDs.  A 2021 Form 5329 in the IRA owner’s name should be filed with the IRA owner’s amended 2021 tax return requesting a waiver of the excess accumulation penalty due to the remaining portion of the 2021 RMD being satisfied by a beneficiary.

Submitted by Alan - IRA critic on Mon, 2022-12-12 22:47

  • From a Natalie Choate article on executor’s responsibilities, she states that the beneficiary is only directly responsible for the year of death RMD (2022), but that the executor can be held responsible for prior missed RMDs and any excise taxes due for such missed RMDs would be the responsibility of the estate along with the 5329 forms to request the penalty waiver if the executor can produce. The problem is the beneficiary controls the inherited IRA, so how does the executor make up prior missed RMDs without control of the IRA unless the estate is the IRA beneficiary?  See p 14, 15 in following link:
  • Natalie Choate – Death&Taxes2020-2.pdf (redwoodempireepc.org)
  • I doubt that executors are even thinking about this exposure, or that the IRS is pursuing estates. Practically speaking, for those IRA owners who never took an RMD, the IRS is probably counting on the 10 year rule.

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