5329 for late 2018 MRD

[matt-hayes]

My wife is the beneficiary of her late brothers retirement account IRA. He passed in Nov 2018. An IRA rollover was done in June 2019 into a separate new IRA account in her name. We file joint. We were not aware of the need for Minimum Required Distribution until recently, and did not take one last year. This year we did take the MRD for last year, but late. 

Do I need to file 5329 to justify why the 2018 MRD was late, and if so, how with TurboTax ?

Do I need to account for this MRD in our 2019 taxes, and if so, how ?

[MarilynG1]

Sorry for your loss. 

Your 1099-R may have Code 4 in Box 7 to indicate that it was inherited, and possibly also Code G to indicate the rollover. 

If the entire amount of the inherited IRA was rolled over, indicate in TurboTax that 'all of the distribution was RMD'.

Since the date of death was November 2018, the RMD is considered taken for 2018 by the plan owner's distributions prior to death.

Provided that a separate account for each designated beneficiary was established by December 31, of the year following the year of death, each beneficiary will be required to calculate and take their own RMD as beneficiary from their own inherited IRA account. 

Click this link for more info from the IRS on Distributions from IRAs. 

[matt-hayes]

Thanks for the reply. I do need to correct something I said. Her brothers retirement account was a 401k not an IRA. Not sure if that makes any difference.

The 1099-R for the initial distribution does have Code 4 and G in Box 7 and TurboTax did seam to guide me through the rollover documentation as you said.

My concern is more about any 2019 RMD from my wife's new IRA that we setup to receive the rollover in June 2019.

We did not take this 2019 RMD until March 2020. How do I document and justify this within TurboTax ?

[fanfare]

Double check what happened here.

 It is not permitted to rollover an inherited 401k into an IRA in her own name. The IRA must stay in her brother's name.

If  you put money into your own IRA, over $6,000 or her earnings, whichever is smaller, you have an excess contribution and that will be penalized until you remove the excess and any earnings that came about.

[matt-hayes]

I don't believe there was an issue with the rollover. Her brothers plan was a profit sharing 401k through his employer. He was not married and had no children. My wife was the only beneficiary. According to the paperwork that employer supplied, the only option, for a non-spouse beneficiary, was a direct rollover into an inherited IRA.

[fanfare]

Correct.

An inherited IRA is in her brother's name, with her as beneficiary.

[fanfare]

turbotax makes it hard to prepare 5329 without a 1099-R.

@dmertz has the procedure.

[matt-hayes]

I have the 1099-R for the initial rollover in June 2019. Should I have a 1099-R for the first RMD taken in March 2020 (late for 2019) ?

[macuser_22 · Accepted solution]

---

@matt-hayes wrote:

I have the 1099-R for the initial rollover in June 2019. Should I have a 1099-R for the first RMD taken in March 2020 (late for 2019) ?

---

No.  If taken in 2020 it will go on your 2020 that return next year.

If you missed the 2019 RMD then you need send a 5329 requesting a waiver of the 50% penalty that is almost always granted if the missed RMD was taken and there is a reasonable explanation.

The 5329 CANNOT be done in TurboTax since TurboTax only supports a 5320 for the taxpayer or spouse and an inherited IRA must be kept in the name of the deceased with you as benificuary.  You must complete the request by hand and mail the 5329 to the address that a 1040 would be mailed to.  (Or if you have not filed 2019 yet then print and mail the entire 2019 tax return with the 5329 attached).

Download blank 2019 5329 form here:
Form: http://www.irs.gov/pub/irs-pdf/f5329.pdf
Instructions: http://www.irs.gov/pub/irs-pdf/i5329.pdf

Quote:
"Waiver of tax. The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows.
1. Complete lines 52 and 53 as instructed.
2. Enter “RC” and the amount you want waived in parentheses on the dotted line next to line 54. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line 54.
3. Complete line 55 as instructed. You must pay any tax due that is reported on line 55.
The IRS will review the information you provide and decide whether to grant your request for a waiver. "

Line 55 should be zero.