never took rmd the last few years

Technical topics regarding tax preparation.
#1
newbie  
Posts:
126
Joined:
22-Aug-2018 3:00pm
Location:
New York
I have someone that didnt take RMD the last few years and the brokerage house admitted they didnt contact him for the RMD. has anyone ever run into this problem? what should this person do? Thank you for your help
 

#2
JAD  
Posts:
4025
Joined:
21-Apr-2014 8:58am
Location:
California
Brokerage house needs to calculate the amount he needs to take to make up for the past years and the earnings on those amounts. Then round up and take the distribution. File the forms (5329?) showing the waiver of the penalty. Attach a statement explaining that elderly client relied upon brokerage firm, who didn't properly notify him. Distribution of minimum amounts plus earnings has been made. Processes have been put in place to make sure this doesn't happen again. And therefore you request a waiver of the penalty.

You might receive a notice that the penalty waiver has been granted. You might not hear anything. So far, I've never received a reject letter on this followed by a penalty assessment.
 

#3
Nilodop  
Posts:
18761
Joined:
21-Apr-2014 9:28am
Location:
Pennsylvania
I don't think of 70-1/2 as elderly. :evil:

Who pays if the abatement is denied?
 

#4
sjrcpa  
Posts:
6477
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
Nilodop wrote:Who pays if the abatement is denied?

Never had that happen but I'm sure brokerage firm would deny any responsibility.
 

#5
newbie  
Posts:
126
Joined:
22-Aug-2018 3:00pm
Location:
New York
JAD wrote:Brokerage house needs to calculate the amount he needs to take to make up for the past years and the earnings on those amounts. Then round up and take the distribution. File the forms (5329?) showing the waiver of the penalty. Attach a statement explaining that elderly client relied upon brokerage firm, who didn't properly notify him. Distribution of minimum amounts plus earnings has been made. Processes have been put in place to make sure this doesn't happen again. And therefore you request a waiver of the penalty.

You might receive a notice that the penalty waiver has been granted. You might not hear anything. So far, I've never received a reject letter on this followed by a penalty assessment.


Thanks JAD. couple of questions: do i just file 5329 by itself and what do you mean by "showing the waiver of the penalty". What does that mean? Is this unprecedented? What about just doing the current year for the RMD and forgetting the past? Just throwing it out there? Thoughts?
 

#6
JR1  
Posts:
6043
Joined:
21-Apr-2014 9:31am
Location:
Western 'burbs of Chicago
Look near the bottom of the form, maybe page 2....there's a checkbox to request waiver. Happens all the time enough that they created this on the form!!
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#7
DavidG  
Posts:
379
Joined:
21-Apr-2014 1:29pm
Location:
San Francisco Bay Area
Not a check box, but see the instructions for line 52 on Form 5329 and the IRS explains how to request abatement. As JR1 said, very common.

JR1 wrote:Look near the bottom of the form, maybe page 2....there's a checkbox to request waiver. Happens all the time enough that they created this on the form!!
 

#8
Posts:
2657
Joined:
28-Apr-2021 7:00am
Location:
FL
My initial reaction is to do nothing unless the IRA administrator is going to notify the IRS about the past. Presumably, the RMD will be recalculated for the current year and the TP can move forward as if there were no problem.
Steve
 

#9
sjrcpa  
Posts:
6477
Joined:
23-Apr-2014 5:27pm
Location:
Maryland
The IRA custodian sends a 5498 to the IRS annually with the RMD required box checked.
I advise clients to do as suggested above.
 

#10
Joan TB  
Posts:
1897
Joined:
21-Apr-2014 9:08am
Location:
Texas
For a 50% penalty for excess accumulations (calculated each year), I would not recommend what gatortaxguy suggests.
 

#11
Posts:
2657
Joined:
28-Apr-2021 7:00am
Location:
FL
I hear you. I'm just saying that was my initial reaction.

The 50% penalty is on the undistributed amounts. Those penalties are already applicable. Presumably the administrator already filed the required forms. The IRS has not sent any notices. Accordingly, it is not at all clear that doing anything is actually in the client's interest.
Steve
 

#12
Andrew  
Posts:
806
Joined:
21-Nov-2018 5:00pm
Location:
CA
newbie wrote:I have someone that didnt take RMD the last few years and the brokerage house admitted they didnt contact him for the RMD. has anyone ever run into this problem? what should this person do? Thank you for your help


Yep, I have. The IRS makes it easy for these penalties to be forgiven. Make sure your client gives you the broker's RMD calculation (the broker makes money of your client's investments and should send client a letter with the RMD calculation every year). Please calculate the RMDs on the tax returns for the client and compare.
 

#13
WBR  
Posts:
245
Joined:
17-May-2014 3:36pm
Location:
Cleveland, Ohio
For a missed 2021 RMD would you advise sending in the completed form 5329 with the e-filed personal income tax return or just send the form as a separate paper filing?

Personal return should be ready in a few weeks once Lacerte figures out what they’re doing with form 7203.
 

#14
HowardS  
Posts:
2820
Joined:
21-Apr-2014 3:12pm
Location:
Southern Pines, NC
Send the form with the return. Your client should by now have taken the missed RMD and the RC should state that. Common problem, easy fix.
Retired, no salvage value.
 

#15
DavidG  
Posts:
379
Joined:
21-Apr-2014 1:29pm
Location:
San Francisco Bay Area
Send in Form 5329 with the 2021 tax return and follow the instructions for Part IX to have the penalty waived, if applicable.

WBR wrote:For a missed 2021 RMD would you advise sending in the completed form 5329 with the e-filed personal income tax return or just send the form as a separate paper filing?

Personal return should be ready in a few weeks once Lacerte figures out what they’re doing with form 7203.
 

#16
JoJoCPA  
Posts:
561
Joined:
1-Sep-2019 2:57pm
Location:
Massachusetts
I’ve had to do this a few times over the years. Never had a problem. I think once we got a response that the penalty has been waived. The rest we never heard about it again.
 

#17
Posts:
224
Joined:
15-Jan-2015 4:16pm
Location:
Indiana
I thought the Form 5329 had to be filed for each year that the RMD was missed? Is the advice suggesting that the taxpayer should file just one 5329 grouping all missing years together?
 

#18
Posts:
724
Joined:
22-Sep-2014 9:25am
Location:
Farmington, Michigan
Whestsider wrote:I thought the Form 5329 had to be filed for each year that the RMD was missed?
Correct

Whestsider wrote:Is the advice suggesting that the taxpayer should file just one 5329 grouping all missing years together?
No
Dave

Taxation is the price we pay for failing to build a civilized society. ~ Mark Skousen
 

#19
Posts:
224
Joined:
15-Jan-2015 4:16pm
Location:
Indiana
I have a taxpayer who turned 70 1/2 in 2017. Starting taking his RMD's in 2018 from various defined contribution retirement accounts. Fast forward to 2021, taxpayer is informed by letter that he is eligible for benefits from a defined benefit plan and was instructed to apply. This originated from his days as a coal miner. He only worked there a few years and when he left that job (approximately 30 years ago) he was told that he did not accumulate enough time to have these benefits. Is there an RMD problem for 2018 and 2019? If so, how would you calculate RMD for a defined plan so I can file Form 5329 for those two years to ask for abatement?
 

#20
Posts:
25
Joined:
24-Feb-2022 10:56am
Location:
midwest
If I recall correctly 2020 was the year RMD's were waived due to the pandemic.
 

Next

Return to Taxation



Who is online

Users browsing this forum: DAJCPA, dave1040, Google Adsense [Bot], JAD, jon, MilesR, Seaside CPA, SumwunLost, Tangled Web, taxp2345, TheGrog, Wiles, WiscoTax and 171 guests