When filing a Form 5329 to request a penalty waiver, should the penalty payment be made as part of the 5329 filing or as part of the 1040 extension filing in April ?

[fanfare]

you don't need any history maintained for the next tax year.

So your plan to file on paper and attach 5329 is a good one.

[MrsJos_E_W]

@fanfareThank you! Now I can move forward with less trepidation about doing the wrong thing! I do appreciate your time and efforts as well as those of your colleagues on this forum.

[Heathrfam22]

Hi Champ,

I was just completing the 5329 form and was planning on requesting partial penalty relief, already had the forms in the envelope.  After reading your message in regards to the penalty waiver and the exclamation advice, I am now going to ask for the full waiver of the penalty.   And hopefully, this will all go away! (we paid the taxes on the money, didn't pay the penalty)  I really really really appreciate your information and your description,  especially the reasoning in layman's terms.  

Thank you so much!!!!!

Heather

[Heathrfam22]

1. Meant Explanation Advice, not an exclamation

[macuser_22]

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@Heathrfam22 wrote:

Hi Champ,

I was just completing the 5329 form and was planning on requesting partial penalty relief, already had the forms in the envelope.  After reading your message in regards to the penalty waiver and the exclamation advice, I am now going to ask for the full waiver of the penalty.   And hopefully, this will all go away! (we paid the taxes on the money, didn't pay the penalty)  I really really really appreciate your information and your description,  especially the reasoning in layman's terms.  

Thank you so much!!!!!

Heather

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This thread is over a year old and has different subjects in it.

If you are asking about s missed RMD penalty then what year was it missed?   There was no RMD requirement for 2020 so it was not missed if for 2020.

[Heathrfam22]

Hi Champ,

Thanks for inquiring...

It is for 2018, we paid the taxes but didnot include the penalty on our 1040 for the early distribution.  Hoping I can ask you a couple more questions, is there a limit to how many times I can apply for a waiver for the early distribution fee?  We started withdrawing funds in 2018, continued in 2019, and 2200.  Each subsequent year the withdrawal will be larger therefore the penalty will be larger.  

Wondering if it is better to accept the penalty now and "save" our waiver requests for the future?  I'd really appreciate you looking into your crystal ball and letting me know if the IRS is going to continue waiving the early distribution fee as was done in 2020 for the next few years?  We have to amend our 2019 taxes to address the early distribution fee.  

Thanks again for your information, it was kind of crazy I came across your message as I was getting ready to mail in my 5923 form only asking for a partial waiver of the penalty.

Thanks for your help,

Heather

[macuser_22]

---

@Heathrfam22 wrote:

Hi Champ,

Thanks for inquiring...

It is for 2018, we paid the taxes but didnot include the penalty on our 1040 for the early distribution.  Hoping I can ask you a couple more questions, is there a limit to how many times I can apply for a waiver for the early distribution fee?  We started withdrawing funds in 2018, continued in 2019, and 2200.  Each subsequent year the withdrawal will be larger therefore the penalty will be larger.  

Wondering if it is better to accept the penalty now and "save" our waiver requests for the future?  I'd really appreciate you looking into your crystal ball and letting me know if the IRS is going to continue waiving the early distribution fee as was done in 2020 for the next few years?  We have to amend our 2019 taxes to address the early distribution fee.  

Thanks again for your information, it was kind of crazy I came across your message as I was getting ready to mail in my 5923 form only asking for a partial waiver of the penalty.

Thanks for your help,

Heather

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This thread is about the waiver for a missed RMD  (Required Minimum Distribution) from a Traditional IRA for age 70 1/2 or older for 2019.

It has nothing to do with the 10% early distribution penalty for distributions under age 59 1/2 - there is no waiver for that penalty.

[Heathrfam22]

Thanks for the info... 

Not what I wanted to hear, the irs doesnot waive the early distribution penalty?

[macuser_22]

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@Heathrfam22 wrote:

Thanks for the info... 

Not what I wanted to hear, the irs doesnot waive the early distribution penalty?

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No- never.   But there are several exemptions from the penalty.  TurboTax will ask you if any of these apply and give a list of possible exceptions.     Also for 2020 if the distribution was because of COVID or COVID related  (per the IRS requirements) then there is no penalty.

[Percival]

I did not receive my RMD for 2021 from a Vanguard IRA due to a misunderstanding. I have to file a Form 5329 and add an amount from that Form on a Schedule 2 line 8 on my 1040. I do not have a schedule 2. How do I get one?

[AmyC]

The schedule 2 would show your penalty. Instead, you can request a waiver of the penalty. Usually anything reasonable will be allowed. If there was a misunderstanding, give it a try. If they deny it, you can pay the penalty. The 5329 can be sent in with your return. Of course, you need to be in the process of getting that missed amount into your hands, if you haven't already.

You may qualify for a waiver if you have a good reason for missing the RMD and have now tried to remedy the situation with a distribution. The instructions state: 

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 of the shortfall 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. 

@Percival

[FF1092TCH]

I received 5329 tax exemption by checking box 3 totally disabled which allows the penalty  tax to be waived by IRS from  2008-2020 . I'm I still tax exempt in 2021?

[MarilynG]

You would need to claim the exception each year that you had an early distribution on Form 1099-R that could incur a penalty.

After you enter your 1099-R, TurboTax will ask you about the Penalty Exception.

@FF1092TCH