In 2009 my dad passed away and I received an Inherited IRA. I never looked into any of the rules of IRA's, and have missed multiple years of RMD's. What should i do?

[seandobgondo]

I've done some research online and it says to hire a tax professional.  And that they will need to write a letter in my behalf to the IRS to try to avoid some penalties.  Also that I will need to withdraw all the missed RMD's and refile all those years tax returns.  Sounds like I'm in a bit of a pickle.  Would turbotax offer those kind of services?

[dmertz]

Did your father die after his Required Beginning Date for RMDs?  RBD is April 1 of the year following the year in which he reached, or would have reached, age 70½.

[seandobgondo]

He was 56

[dmertz · Accepted solution]

Given that your father died before his Required Beginning Date for RMDs and that you were the designated beneficiary, you had the choice of either taking distributions under the 5-year rule whereby the inherited IRA was required to be depleted by the end of 2014 (the fifth year following the year the he died) or you were required to take annual distributions based on your life-expectancy in 2010, reduced by 1 for each succeeding year.  However, you did neither.  If the IRA agreement makes the 5-year rule the default under the circumstances, you are stuck with taking a total distribution from the inherited IRA and filing a Form 5329 requesting a waiver of the excess accumulation penalty.  If the IRA agreement is instead silent on the default distribution method or the agreement specifies life-expectancy as the default, it should be possible to restore distributions based on your life-expectancy rather than be forced to now empty the inherited IRA under a late satisfaction of the 5-year rule.  PLR 200811028 allowed the taxpayer in that case to do this upon making up all of the missed life-expectancy RMDs and paying a 50% excess-accumulation penalty for each RMD taken late.  (For some reason that taxpayer did not request waivers of the excess-accumulation penalties.):

https://www.irs.gov/pub/irs-wd/0811028.pdf

While a PLR applies only to that particular taxpayer, it provides insight as to how the IRS is likely to treat a similar case such as yours.  If your father had died after his RBD, RMDs based on your life expectancy would be your only option (and is the desired option).

To get caught up on the life-expectancy payout, you would calculate and make distributions of the RMDs for 2010 through 2017 and request a waiver of the excess-accumulation penalty for each year by filing each year's Form 5329 to request the waiver.  The instructions for requesting the waiver are on the last page of the Instructions for Form 5329.  Each year's RMD calculation would be based on the previous year's actual year end balance in the account.  You would end up paying 2018 income taxes on the entire amount distributed in 2018 (including your 2018 RMD which is not yet late).  I don't know that you would need to use a tax professional to prepare this, it seems pretty straightforward, but doing so might give you some additional confidence.  Beware that it will probably be difficult to find any with experience with this specific issue.

[dmertz]

The above assumes that you were a designated beneficiary on your father's IRA or the qualified retirement plan that was rolled over to the inherited IRA for your benefit.  If instead this was your father's IRA which had no designated beneficiary and, as a result, his estate was the beneficiary and the estate distributed the IRA intact as an inherited IRA for your benefit under the terms of his will or the intestate provisions of the state, distribution to you under the 5-year rule is required.