Rolled over RMD
I accidentally rolled over my RMD and asked my custodian to make a corrective distribution. My corrective distribution was less than my RMD due to market declines. Am I required to withdraw additional funds to satisfy the RMD? If not, what code section or PLR details this? I’m struggling to find something on this. Many thanks!
Permalink Submitted by David Mertz on Thu, 2023-04-27 00:08
Don’t confuse the gain/loss adjusted amount *distributed* with the amount of contribution returned. Regardless of the adjusted amount distributed, provided the custodian did the gain/loss calculation correctly the amount of contribution returned is the amount of contribution that you asked to be returned. For example, if your excess contribution resulting from the rollover was $5,000 and the market dropped 10%, a distribution of $4,500 would be a return of the $5,000 contribution accompanied by a distribution of negative $500 representing the loss. The $4,500 distribution represents a return of the entire $5,000 contribution. This derives from section 408(d)(4)(C) of the tax code.
Permalink Submitted by Alan - IRA critic on Thu, 2023-04-27 00:44
Note that your RMD was satisfied whether you rolled it over or not and must be reported as a taxable distribution less any IRA basis rather than as a rollover. The excess contribution created by the rollover is corrected by the proper return of excess process described by DMx. This error will not cost you much, rather it creates more complex tax reporting which includes 2 1099R forms and an explanatory statement regarding the corrective distribution.