We forgot to take an RMD for 2017 from wife's IRA, so took it 1/2/18. I know I'll have to request a waiver of penalty. Do I do that for 2017 or 2018 return?

[motomanic]

We took a late RMD from my wife's IRA on Jan 2, 2018. For that same account I had to report a rollover to a different institution. When I filled in the rollover distribution I couldn't figure how to report the late RMD so that I could request a waiver of penalty. Since the RMD distribution was in 2018 do I report the late RMD on 2018 return or does that need to be reported on 2017 tax return?

[KarenJ · Accepted solution]

If you took the missed RMD in 2018, it will be reported on your 2018 tax return next year along with your 2018 RMD.

One of our TurboTax Superuser, Macuser_22 , had a great response to this question of how to request a waiver:

You need to take the missed RMD ASAP and file a 5329 with your mailed 2017 tax return.

It is almost impossible to prepare a  5329 form with TurboTax if you do not have a 1099-R to file.   You are better off just downloading the forms from the IRS.        Only if you have a 2017 1099-R to enter can the 5329 be created.  If no 1099-R then also hand fill out the IRS 2017 form and attach it to your 2017 tax return that you will need to mail.

From 5329 instructions:Waiver of tax.   The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows.

1.    Complete lines 52 and 53 as instructed.
2.    Enter “RC” and the amount you want waived in parentheses on the dotted line next to line 54. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line 54.
3.    Complete line 55 as instructed. You must pay any tax due that is reported on line 55.

  The IRS will review the information you provide and decide whether to grant your request for a waiver.

Here are links to the 2017 5329 form and instructions.  See part IX of instructions, page 7.

https://www.irs.gov/pub/irs-pdf/f5329.pdf

https://www.irs.gov/pub/irs-pdf/i5329.pdf

[fanfare]

OR, use a better tax software program.

ALSO,

"3.    Complete line 55 as instructed. You must pay any tax due that is reported on line 55.:"
If you follow the instructions you will surely end up with an extra tax amount due.

Instead enter the total amount of your missed RMD. Line 55 should be zero. IRS will waive the penalty .

[RaineyReid]

Just wondering what RC stands for?  Need to submit a 5329 for 2022.  Thanks.

[dmertz]

"Reasonable Cause"

[RaineyReid]

Many thanks.

[bayolive]

To Intuit Tax Advisor
I had encounter the same problem, I forgot to instruct Traditional IRA Account Manager to Distribute My 2022 IRA RMD for me and my spouse before the end of December 2022, but We executed the late distribution of RMD in Mid January 2023 including withholding Federal Tax Penalty Fee of 25%.
As you have instructed I intend to Create Form 1099R manually and request Waiver of Penalty on filing Form 5329 , with the reason that We were abroad for Attending Funeral Service of my In-Law who passed away on Dec. 31, 2022.
This is our first time we missed the RMD distributions on time; to avoid this happened again, I have instructed my IRA Account Mgr to schedule for future RMD Distributions in Mid October of each year.

My Question: Should I treated paying Late RMD Distribution with 25% Penalty on 5329 Form Tax Year 2023? Or IRS will impose 50% Penelties (regardless if IRS will grant us Waiver of Penalty or Not) for failing in reporting Late RMD Distribution 2022 when I filing 2023 Federal Tax Return Next Year.
Please Response my Question before I send my Federal Tax Return 2022 by mail.
Thanks
Tax Payer
Nobleman 

[fanfare]

include 2022 Form 5329 with your 2022 tax return for a missed 2022 RMD.

If TurboTax won't attach it you'd have to file it attached to 2022 Form 1040-X and mail it.

@bayolive 

[fanfare]

if you are requesting waiver of the penalty

Form 5329 Line 55 should be zero. 

IRS always grants the waiver when your explanation shows timely action.

@bayolive 

[dmertz]

@bayolive , there is no Form 1099-R to create for 2022.  This distribution that was made in 2023 goes on your 2023 tax return, not on your 2022 tax return.  The only thing you will do with your 2022 tax return is file Form 5329 Part IX where you'll request a waiver of the penalty.  It's not clear if the IRS will change their policy on waiving the penalty now that SECURE 2.0 has changed the penalty.  However, because you promptly made the late distribution, the penalty will be no more than 10% even if the IRS does not waive the penalty.