RMD that got away

Submitted by Vickie Intriago on Tue, 2024-01-23 18:30

My planning client’s RMD for 2023 was $48,000. She sent $8,000 in a QCD but forgot to ask the custodian for the $40,000 in a RMD. She is mortified and feels the IRS will be coming after her. I was not managing this account otherwise I would be on top of this. Can she simply take the $40,000 now and wait for the IRS to send her a bill for the penalty? Or, does she volunteer the penalty? I know the penalty could be as low as 10%. She will be withdrawing these funds within 30 days of the December 31st deadline. I cannot believe the IRS has 73 year widows on their radars. Thanks



Submitted by David Mertz on Tue, 2024-01-23 18:46

  • She should complete the late RMD now and with her 2023 tax return file Form 5329 requesting a waiver of the excess-accumulation penalty per the instructions for Part IX of Form 5329.  No payment of the penalty is to be made with the request for waiver.  If the IRS declines the waiver, they will bill for the penalty.
  • The 2023 Instructions for Form 5329 are still in draft form, but the instructions for requesting the waiver are the same as in the 2022 instructions.
  • The distribution of the $40,000 will be taxable on her 2024 tax return along with whatever portion of her 2024 RMD is not a QCD.

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