Client took too much of an RMD in 2022

Submitted by Kevin O'Hearn on Tue, 2023-03-28 18:52

Hello,

I have a situation were a client had an RMD of $14,000 in 2022 and was taking monthly payments of around $1150. For some reason (which we are looking into) for the last 6 months of 2022 the monthly payments were increased to $9,000. The client ended up taking about $40,000 more in distributions over their required RMD amount.

Could this amount $40,0000 be subject for a “Self certified late rollover contribution”? We are just trying to explore options the return a part of the amount that exceeded the RMD amount for 2022.

The plan ran for the same amount ($9,000) in 2023 but those could be rolled back as a 60 day rollover. Any guidance or feedback would be greatly appreciated.

Thank you.



Submitted by Alan - IRA critic on Tue, 2023-03-28 20:04

  • The problem with this plan is that there have been around 6 or 7 distributions over the last 9 months that exceeded the remaining RMDs for 2022 or 2023 respectively, and self certification only extends the 60 day rollover period, it does not waive the one rollover limit for 12 months or allow any RMD amount to be rolled back. Therefore, even if the custodian accepted the self cert form as a financial institution error, only 1 $9000 distribution could be rolled back, most likely the first full $9000 distribution in 2022 after the 2022 RMD (14k) had been completed. That would reduce his 2022 taxable income by 9000. 
  • How could this have gone on for 9 months before he noticed it?  
  • Assuming that the first two distributions in 2023 completed the 2023 RMD, the March distribution and any portion of the Feb distribution that exceeded the RMD could be converted to a Roth IRA. It would still be taxed, but a Roth conversion is the next best option to a roll back, and there could be no rollback of this year’s distributions if the self cert form uses up the one rollover allowed per 12 monts for a 2022 distribution.
  • I am assuming that there is no current employer plan to which the amounts in excess of the RMDs could be rolled into. Rollovers to a non IRA plan are not subject to the one rollover limit. 

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