First, contact the "Financial Institution". Are they going to issue a 1099-R as a 2024 transaction?
If they are, you can simply post it for 2024 and be done.
You need to file IRS Form 5329.
- TurboTax does support this form
- Don’t be too quick to send in that payment.
- The IRS allows for waivers of the penalty if there is a “reasonable error.”
- While there are no guarantees, the odds are good that you can get a waiver.
AI Overview
To submit a waiver for a late Required Minimum Distribution (RMD) penalty, you must file IRS Form 5329 and attach a letter of explanation detailing the circumstances and steps taken to rectify the shortfall.
Here's a breakdown of the process:
1. Understand the Situation:
- Missed RMD:
- If you failed to take the required minimum distribution from your retirement account by the deadline, you may be subject to a 25% excise tax penalty.
- Waiver Possibility:
- You can request a waiver of the penalty by filing Form 5329 and providing a letter of explanation.
- Reasonable Error:
- The IRS may waive the penalty if the shortfall was due to a reasonable error and you've taken steps to remedy the situation.
2. Gather Information:
- Form 5329:
- Obtain IRS Form 5329, "Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts".
- Letter of Explanation:
- Prepare a clear and concise letter explaining why you missed the RMD and what steps you've taken to correct the situation.
- RMD Details:
- Gather the necessary information about the missed RMD, including the amount and the year it was due.
3. Complete Form 5329:
- Part IX: Check the box to claim a waiver and enter the amount of the RMD for which you are requesting a waiver.
- Explanation: Provide a detailed explanation of the circumstances that led to the missed RMD and the steps taken to rectify the situation.
- Attach Letter: Attach the letter of explanation to Form 5329.
4. File Form 5329:
- With Tax Return:
- If you haven't filed your tax return, submit Form 5329 and the letter of explanation with your tax return.
- Separately:
- If you have already filed your tax return, submit Form 5329 and the letter of explanation separately to the IRS.
5. Example Letter Content:
- State the Issue:
- Clearly state that you are requesting a waiver of the 25% penalty for failing to take the RMD.
- Explain the Reason:
- Provide a detailed explanation of the reason for the missed RMD, such as a reasonable error or oversight.
- Detail Corrective Actions:
- Explain the steps you have taken to remedy the situation, such as taking the missed RMD.
- Show Good Faith:
- Demonstrate that you are acting in good faith and taking steps to avoid future occurrences.
- Important Notes:
- Consult with a Tax Professional:
- If you are unsure about the process or the requirements for a waiver, consult with a tax professional for guidance.
- Timeliness:
- Act promptly to correct the RMD shortfall and submit Form 5329 with the letter of explanation to increase your chances of a successful waiver.
- Keep Records:
- Maintain records of all communications with the IRS and any relevant documents related to the RMD and the waiver request.