Did not take RMD's

Hi,

I have an elderly client who didn't take RMD's from an IRA account that on one was aware of for multiple years.

I know there is a 50% penalty for the amount of RMD not taken for every year, and that normally you can have the penalty waived.

What I plan to recommend is that the client immediately takes the RMD's for the last 3 years only, and then amend those returns and request that the penalty be waived for each of the 3 years.

Only 3 years because beyond that is outside of the statute of limitations.


What do you think? any advice is appreciated!

Only 3 years because beyond that is outside of the statute of limitations.

Has the statute of limitation started to run on unfiled Form(s) 5329 for the older years?

https://www.taxprotalk.com/forums/viewtopic.php?f=8&t=1867&p=21268&hilit=5329+sol#p21268

There's a separate SOL for the 5329. The 5329 is a return unto itself.

Paschall, Robert K., (2011) 137 TC 8, 137 TC No 2.

She should take all of the missed RMDs and beg forgiveness on the 5329.
I have done the request for penalty waiver on one 5329 covering all years missed RMDs.

If he takes RMDs now (2022), why would that require amending earlier returns?

4974 says 50% excise tax for failure to take RMD.
It also says the tax may be waived for RC for the taxable year.
Instructions say if filing for a prior year you must use that year's form.

For multiple years, any given year may or may not be waived. I would file the appropriate standalone 5329 for each tax year.

4974 says 50% excise tax for failure to take RMD.
It also says the tax may be waived for RC for the taxable year.
Instructions say if filing for a prior year you must use that year's form.

For multiple years, any given year may or may not be waived. I would file the appropriate standalone 5329 for each tax year.

Okay thanks!, that is what I will do.

If he takes RMDs now (2022), why would that require amending earlier returns?

Yeah, I agree. No need to amend prior years returns.

Only 3 years because beyond that is outside of the statute of limitations.

Has the statute of limitation started to run on unfiled Form(s) 5329 for the older years?

I have no idea.

I am a little foggy on statute of limitations rules. In a case like this, I was hoping that anything past 3 years could be left alone???

4974 says 50% excise tax for failure to take RMD.
It also says the tax may be waived for RC for the taxable year.
Instructions say if filing for a prior year you must use that year's form.

For multiple years, any given year may or may not be waived. I would file the appropriate standalone 5329 for each tax year.

How many years back do you recommend filing the 5329's?

all the way back until the taxpayer turned 72?

Has the statute of limitation started to run on unfiled Form(s) 5329 for the older years?

No.
https://www.irs.gov/irm/part4/irm_04-07 ... 6339204848
The statute of limitations (SOL) for assessment of taxes expires the later of, three years from the due date of the Form 5329 return or the date the return is filed.

If a Form 5329 is not filed, there is no SOL date.
A return is deemed filed on its due date if filed on or before its due date.

Missed RMD's carry a 50% excise tax that is very easily waived. Failing to file 5329's for those years to start the SOL running would be malpractice IMO.

They are simple forms. RC's are always honored in my experience. Your RC could be a recitation of Green Eggs And Ham and still be approved...

Missed RMD's carry a 50% excise tax that is very easily waived. Failing to file 5329's for those years to start the SOL running would be malpractice IMO.

They are simple forms. RC's are always honored in my experience. Your RC could be a recitation of Green Eggs And Ham and still be approved...

So are you saying that:

I should file a form 5329 for every tax year since the client reached RMD age?

and then also, calculate the total RMD shortfall for every tax year since the client reached RMD age, and then immediately take that amount?

Yes. 4974(d)

(d)Waiver of tax in certain cases
If the taxpayer establishes to the satisfaction of the Secretary that—
(1)the shortfall described in subsection (a) in the amount distributed during any taxable year was due to reasonable error, and
(2)reasonable steps are being taken to remedy the shortfall,
the Secretary may waive the tax imposed by subsection (a) for the taxable year.

A good read on this issue:
https://www.kitces.com/blog/fix-rmd-missed-forgotten-miscalculated-corrective-action-form-5329-penalty/

I should file a form 5329 for every tax year since the client reached RMD age?
and then also, calculate the total RMD shortfall for every tax year since the client reached RMD age, and then immediately take that amount?

The taxpayer should file a 5329 for each year the distributions didn't exceed the aggregate RMDs. Did the client have more than one IRA?

What Slippery said. Sometimes folks take more than the RMD, so be sure you use the aggregate of ALL RMD accounts.

You are not required to literally take it from each IRA but are required to take enough to cover the total RMD from all the IRA accounts combined.

Thanks for all the responses, a lot of great information and advice.

Don't forget - no RMD's were required in 20020 fir 2019 balances.

Don't forget - no RMD's were required in 20020 fir 2019 balances.

Yes!, thanks!