2024 - missed RMD for inherited non-spousal RMD

[rlwremo42]

Hi,

I have an inherited IRA from my significant other (non-spouse) who passed mid-2023. She had already withdrawn the 2023 RMD before she passed. 

When I talked to Schwab in 2024 about transferring the account to me (I was just too messed up to deal with that kind of stuff until then), either Schwab misinformed me or I misunderstood what they said about continuing the RMD's each year. My takeaway at the time was just the "it all has to be withdrawn within 10 years of her passing".

Now I've learned that I should have taken a 2024 RMD.

I talked to Schwab today and they told me about the 5329 form I need to fill out and that I should proceed with that as quickly as possible (fortunately there is enough cash in the account so I don't have to worry about selling any positions at the moment). I will have to monitor things and sell a few positions to make the RMD for 2025.

I have filed my taxes electronically with Turbo Tax Premier for the last several years.

Just to make things interesting this was her SEP account. It was converted to an inherited IRA when it transferred to me.

Questions:

Can I do this 5329 process via Turbotax and do it all electronically?

I've read about requesting a waiver of the penalties . . . This makes me think I'll have to print it all out and mail it in, in order to request a waiver of the penalties. Is that just to get the 25% down to 10% penalty or try to get the entire thing waived? (the RMD is approx 15k).

I'm 58 years old. I've read that for an inhertied IRA (I was the sole beneficiary) I'm not subject to 10% "early" withdraw. Is that automatic? Or do I have to put that in with my "waiver request"?

Do I have to file an amended 2024 return? Or just do the 5329?

I literally just a week ago "filed" my taxes for 2024 electronically. I filed for the extension and paid my full estimated taxes before April 15. (turns out I was short by eight dollars: $8.00)

Thanks in advance for advice and guidance. I only realized this situation when I read a similar story on Reddit this past weekend and said "oh crap, that sounds like me!!!!".

[Opus 17]

Yes, as a non-spouse beneficiary, you must withdraw all the funds and close the account by the end of the 10th year AND you must withdraw an RMD each year.  You can't rollover or convert the funds to an IRA in your own name, it must remain as an inherited IRA ("John Smith as beneficiary of Mary Jones" or something like that).  

The RMD is calculated a little differently than the RMD for your own IRA.   You look at Appendix B, Table 1 in publication 590-B. Suppose you were age 50 in 2023 when the owner died.  Your life expectancy was 36.2 years.  Start with that figure and subtract 1 for each year forward.  So in 2024, your RMD is the ending balance on 12/31/2023 divided by 35.2.  Your RMD for 2025 is the ending balance on 12/31/24 divided by 34.2, and so on. https://www.irs.gov/publications/p590b

Also, note that even if you are under age 59-1/2, there is no 10% penalty for early withdrawal from an inherited IRA, just the regular income tax.

Remember an RMD is not a special withdrawal, it just means you have to withdraw more than that during the year.  If you made a withdrawal in 2024 for any reason (living expenses, new car, whatever) that was more than the RMD amount, you already satisfied it.

If you did not withdraw anything, then you first need to withdraw the amount that would have been the 2024 RMD (today, if you did not already withdraw it).  Remember this is your 2024 RMD so you still need to make your 2025 RMD withdrawal before 12/31/25.

Then, you need to file an amended 2024 return where you declare you missed the 2024 RMD and ask for a waiver.  This is almost always granted, you just have to ask.  You can write that you didn't know the rules for inherited IRAs, you took the withdrawal as soon as you learned the rules (in 2025) and will report the income on your 2025 return.

Then on your 2025 return, you will report both withdrawals as taxable income since they both happened in 2025.  (The missed RMD is not taxable on your 2024 return, so you will not owe any additional tax with the 2024 return, you just need to file to get the waiver request taken care of.)