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Level 2

RMD Not Withdrawn by ESOP Manager before Rollover

The manager of my company's Employee Stock Option Program forgot to take out my RMD when I rolled over the ESOP into my own IRA at the end of December 2019. I had retired/terminated in January 2019 and had access to the ESOP funds at the end of the year. The IRA firm separated the amount of the RMD into a money market fund from the total funds of the rollover so that I could take it post-rollover. I withdrew the RMD in early January 2020 less the federal and state withholding. Since I turned 70 1/2 in 2019, I have until April 2020 to take all my RMD, so I think I am "legal" with respect to taking this RMD. My question is how to account for this action in TurboTax since I won't be receiving a tax document showing the RMD withdrawal in time to submit my 2019 tax return. I also need to enter into TurboTax the amount of federal and state withholding to account for them. I was thinking of making up a 1099-R for the ESOP manager indicating the RMD as a normal distribution, and reducing the amount of the rollover in its 1099-R by the amount of RMD. 

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Expert Alumni

RMD Not Withdrawn by ESOP Manager before Rollover

As you turned 70 1/2 in 2019, you have until 4/15/20 to withdraw your RMD. So you are perfectly in line with the tax laws. You have nothing to report in 2019.

 

Your will receive a 1099-R for tax year 2020 which you will enter in your 2020 return. 

 

Just remember to withdraw your RMD for 2020 before 12/31/2020.

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Level 2

RMD Not Withdrawn by ESOP Manager before Rollover

Thank you MinhT1 for the response. Just to be clear, I would include the RMD I took in January as 2020 income. If so, that makes sense because other advice I've seen indicates that under this scenario one would have to account for the delayed (but not late) RMD from 2019 and the normal 2020 RMD in one's tax return for 2020. For that reason, others advise taking the 2019 RMD by December 31, 2019 to avoid the additional "income" and its ramifications (e.g., higher tax bracket) in 2020. In my case, the RMD wasn't that much money, so it shouldn't affect my taxes too much. Also, 10% was withheld for federal taxes.

 

Because the ESOP had a value of $0 as of December 31, 2019, I wouldn't expect an RMD is required. The rollover amount might be accounted for in the RMD for the existing IRA. It is an odd situation since the rollover amount wasn't in either account on December 31, 2019. I guess I'll figure that out later this year.

 

By the way, from what I've seen, the extended due date in the year after one turns 70 1/2 is April 1 and not April 15.

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Expert Alumni

RMD Not Withdrawn by ESOP Manager before Rollover

That is correct. The extension date has always been April 1.

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