Retirement tax questions

First, contact the "Financial Institution".  Are they going to issue a 1099-R as a 2024 transaction?

If they are, you can simply post it for 2024 and be done.

You need to file IRS Form 5329. 

• TurboTax does support this form
• Don’t be too quick to send in that payment.
• The IRS allows for waivers of the penalty if there is a “reasonable error.” 
• While there are no guarantees, the odds are good that you can get a waiver.

AI Overview

To submit a waiver for a late Required Minimum Distribution (RMD) penalty, you must file IRS Form 5329 and attach a letter of explanation detailing the circumstances and steps taken to rectify the shortfall. 

Here's a breakdown of the process:

1. Understand the Situation:

• Missed RMD:
  • If you failed to take the required minimum distribution from your retirement account by the deadline, you may be subject to a 25% excise tax penalty. 
• Waiver Possibility:
  • You can request a waiver of the penalty by filing Form 5329 and providing a letter of explanation. 
• Reasonable Error:
  • The IRS may waive the penalty if the shortfall was due to a reasonable error and you've taken steps to remedy the situation. 

2. Gather Information:

• Form 5329:
  • Obtain IRS Form 5329, "Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts". 
• Letter of Explanation:
  • Prepare a clear and concise letter explaining why you missed the RMD and what steps you've taken to correct the situation. 
• RMD Details:
  • Gather the necessary information about the missed RMD, including the amount and the year it was due. 

3. Complete Form 5329:

• Part IX: Check the box to claim a waiver and enter the amount of the RMD for which you are requesting a waiver. 
• Explanation: Provide a detailed explanation of the circumstances that led to the missed RMD and the steps taken to rectify the situation. 
• Attach Letter: Attach the letter of explanation to Form 5329. 

4. File Form 5329:

• With Tax Return:
  • If you haven't filed your tax return, submit Form 5329 and the letter of explanation with your tax return.
• Separately:
  • If you have already filed your tax return, submit Form 5329 and the letter of explanation separately to the IRS. 

5. Example Letter Content:

• State the Issue:
  • Clearly state that you are requesting a waiver of the 25% penalty for failing to take the RMD. 
• Explain the Reason:
  • Provide a detailed explanation of the reason for the missed RMD, such as a reasonable error or oversight. 
• Detail Corrective Actions:
  • Explain the steps you have taken to remedy the situation, such as taking the missed RMD. 
• Show Good Faith:
  • Demonstrate that you are acting in good faith and taking steps to avoid future occurrences. 
• Important Notes:
  • Consult with a Tax Professional:
    • If you are unsure about the process or the requirements for a waiver, consult with a tax professional for guidance. 
  • Timeliness:
    • Act promptly to correct the RMD shortfall and submit Form 5329 with the letter of explanation to increase your chances of a successful waiver. 
  • Keep Records:
    • Maintain records of all communications with the IRS and any relevant documents related to the RMD and the waiver request.