Per IRS:
The penalty may be waived if the account owner establishes that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. In order to qualify for this relief, you must file Form 5329 and attach a letter of explanation.
REASONS WHY OBTAINING A WAIVER HAS A LOW PROBABILITY:
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New Rules:
THE 2019 SECURE ACT and subsequent regulations have changed the rules for inherited IRAs, making 2025 the STARTING POINT for compliance with the NEW RMD requirements.
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- 10-Year Rule:
Most non-spouse beneficiaries must deplete the inherited IRA within 10 years after the death of the original account holder, and this often involves taking annual RMDs.
- Penalty for Non-Compliance:
If beneficiaries fail to take the required RMDs, they face a 25% excise tax penalty on the amount they should have withdrawn.
STRATEGIC PLANNING AND CONSIDERATIONS
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Consult with a Tax Advisor:
Given the complexity of the new rules, beneficiaries are strongly encouraged to consult with a tax advisor or financial planner to understand their specific obligations and how to best manage the inherited IRA.
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Strategic Withdrawals
Beneficiaries should consider the tax implications of their withdrawals, as the 10-year rule could lead to a significant tax burden in a single year if all the funds are withdrawn at once.
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Roth IRAs:
Beneficiaries of Roth IRAs are not subject to the same 10-year rule, but they are still subject to RMDs.
SUMMARY
In conclusion, although there are a few specific situations where waivers may be applicable, there is no overarching exemption for the year 2025. Beneficiaries must adhere to the new RMD regulations for inherited IRAs or face potential penalties.
IRS: Retirement plan and IRA required minimum distributions FAQs
Kind Regards,
Franklin
TurboTax Expert
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