Having to pay missed RMD penalty even with waiver on new 2023 Form 5329

[vta1]

Hi all,

Last year I missed my 2023 RMD. As a result, I understand you need to file Form 5329 to to either pay the penalty or request a waiver.

As I'm doubling checking the numbers, it seems that the 2023 form instructions have changed compared to 2022 (2022 Form 5329, 2022 Form Instructions), resulting in having to pay the penalty even while requesting the waiver. I know about the reduced penalty from 50% to 25%/10%, but it looks like you have the pay the additional tax even if you request a waiver?

For example, assume a RMD of $500 in 2023 and none of it was taken out

Line 52 Minimum required distribution for 2023 (see instructions): $500

Line 53 Amount actually distributed to you in 2023 (see instructions): $0

Line 54...(RC $500): $0

Now to calculate Line 55, assuming I made the withdrawal within the correction window, using the Line 55 worksheet on page 9 of the instructions:

Line 1. Yes

Line 2. $500

Line 3. $0

Line 4. $500 - 0 = $500

Line 5. $500 * .1 = $50

Based on the worksheet, going back to Form 5329:

Line 55: $50

The instructions mention in regards to line 55 that "you must pay any tax due that is reported on line 55" as you do end up adding it to a Schedule 2.

If I did everything correctly, I must pay the additional tax of $50 on my current return. This is where I am getting confused. I assume applying for the waiver means I do not pay the additional tax unless denied? Previous posts mention not putting 0 into Line 55, but it looks like that was for previous year's forms. So starting from 2023, payments are made in advance before figuring out whether a waiver is approved?

[MarilynG1]

After you enter your 1099-R and indicate you did not take your RMD, and the amount, TurboTax asks 'Let's see if we can reduce your tax bill' to apply for the waiver within the program.

If you have not yet received a notice from the IRS for the missed distribution, you could check the box that 'you received the distribution during the correction window'  on Form 5329 and request the distribution, if you have not done so already.  Then there will be no penalty on your 2023 return.

Otherwise, yes, you are assessed the penalty but the IRS rarely denies a request for waiver, so you could enter $0 on Line 55, and fill out the Waiver Explanation Statement and Efile your 2023 return. 

Here's more info on Missed RMD's and Form 5329.