RMD non-distribution

[sigie148]

I forgot to make an RMD for last year.  Which would be better for IRS processing (and me!):

1. Prepare 5329 with written excuse and  snail mail to IRS; then do 1040 as usual and E-File, or

2. Just do 1040 and hope I can find 5329 in Turbo Tax to electronically E-File; and, if so, how would I send my separate written excuse?

thanx,

steve

[MaryK4]

You want to use #1- You can prepare the Form 5329 for 2018 and mail with your written explanation.  If there are no other changes to the tax return you can mail it alone.  You can prepare and efile 2019 normally.

[dmertz]

File Form 5329 with your tax return.  Do not send it separately unless you've already filed.  TurboTax will ask you to provide an explanation which will be included in your e-filing.

Assuming that this was not an RMD to be paid to you as beneficiary of an inherited retirement account, if 2019 was your first RMD year, your 2019 RMD is not yet late and there is no need to file Form 5329.  You have until April 1, 2020 to receive your first RMD.

[sigie148]

Thanx for replying, BUT:

1. this is not and inherited IRA but a rollover from my old 401K,

2. and regretfully, this is my 2nd required withdrawal, and subject to a back lashing from IRS.

So to re-clarify: should I do 1040 and E-File, ignoring the 5329 on it (How would I import my explanation into Turbo Tax so it will ride with the E-File); or do the 5329 and explanation and send them separately via hard paper snail mail?

Sigie148

[dmertz · Accepted solution]

You must include Form 5329 Part IX with your tax return.  You must not mail it separately.

Take the late RMD as soon as possible, before you file your tax return.  In TurboTax:

1. Click the Continue button on the Your 1099-R Entries page.
2. Indicate that you did not receive all the RMD for 2019.
3. Enter the total amount required to be taken and the amount you actually received.
4. Verify that the amount that TurboTax indicates as the amount that on which you want the 50% excess accumulation penalty waived is the same as the amount that you will now have taken late. and provide an explanation as to why you took the distribution late at that you have now taken the RMD, albeit late.  ("I forgot" is probably sufficient reasonable cause.  The IRS mainly seems to want to know only that taking it late was not intentional.)

TurboTax will include in your e-filed tax return the explanation and the Form 5329 requesting the waiver of the penalty.

The late-taken RMD will be taxable on your 2020 tax return along with your 2020 RMD.

[sigie148]

I read your solution yesterday, and am starting 1040 today. looks like the best solution.

Thanx

Sigie148

[DaveF1006]

if you need further help, please post again and let us know specifically what issues you are having so we can quickly resolve your issue.

[Lisa3588]

I had a similar problem for 2018. My question is about 2019.  I forgot my 2018 RMD and took it in 2019 before filing my tax return.  I'm squared away with that.  But in reporting the 2018 RMD in 2019, when entering the info on the 1099-R, TT asks: "Was this withdrawal an RMD for 2019?" The answer is no, but the two options are: "Yes, some or all of this withdrawal was an RMD, or No, none of this withdrawal was an RMD."  Which box do I check?

[dmertz]

Lisa3588, answer Yes, this was all RMD.  This is TurboTax actually asking how much of the distribution was ineligible for rollover.  (RMDs are not eligible for rollover.)  It actually doesn't matter how you answer this question if you did not roll any of this money over to another retirement account.

Just make sure that you did not report this distribution on your 2018 tax return.  This distribution is taxable on your 2019 tax return.

[betsy-yalcin]

We forgot to take the RMD on an inherited IRA in 2019.  We took it late, in 2020, when we realized the mistake.

Since we didn't take the RMD in 2019, we don't have a 1099-R to report on the tax return for 2019.  But we need to report that we didn't take the RMD and include form 5329.  In the explanation, it says to click continue on the 1099-R page, but that doesn't seem to work if you didn't receive a 1099-R and have no data to input.

I'm trying to understand how to complete the 5329 without a 1099-R, to calculate the appropriate penalty and/or be able to waive the penalty, which I hope is an option.

Can you help?

[dmertz]

Yes, TurboTax makes it extremely difficult to get Form 5329 included under these circumstances where you have no Forms 1099-R to enter or you are under age 70½.  If you are using the CD/download version of TurboTax you can do it in forms mode.  In the online version of TurboTax you would need to do a convoluted workaround in step-by-step mode:

1. Change your year of birth to something that indicates that you are over age 70½, say, 1945.
2. Enter a dummy Form 1099-R for a regular IRA distribution:  Box 1 and 2a = $1, code 7 in box 7 and the IRA/SEP/SIMPLE box marked and indicate that it was all RMD.
3. Click the Continue button on the Your 1099-R Entries page.
4. Indicate that you did not receive all of the RMD.
5. Enter the amount that you should have received and the amount actually received, then click Continue.
6. Enter your explanation statement
7. Delete the dummy Form 1099-R.  Do not click the Continue button on the Your 1099-R Entries page, otherwise TurboTax might delete the Form 5329 and you'll have to start over.
8. Change your year of birth back to the correct year.

If all else fails, prepare Form 1099-R manually and include it and your explanation with your mailed tax return.

[betsy-yalcin]

dmertz, Thank you so much!

Before seeing your response, I tried finding the form 5329 inside TurboTax, to see if I could fill it in directly.  That seemed to work, I was able to put the amount of RMD that should have been taken, and the explanation for waiver of tax penalty.  Although I saved the completed form, I don't know if it will hold onto it, since I didn't complete the 1099-R section.  I will experiment and see if the form stays in my final return, prior to submitting the filing.  If that doesn't work, I will try the strategy you recommend.  Thanks again, it is a bit of an adventure!

[dmertz]

Filling it in directly in forms mode is the preferred method if you are using the CD/download version of TurboTax.  The convoluted workaround is only necessary when using the online version of TurboTax.