topic Re: RMD in Get your taxes done using TurboTax

RMD

Hol67 — Mon, 09 Mar 2026 04:22:34 GMT

I inherited IRAs from my father. Even though I am under 72 years of age, I was required to take an RMD in 2020 and 2021. My investment company made an error by failing to distribute my 2020 RMD in 2020. Therefore, I had to receive both 2020 and 2021 RMD in 2021. Will I incur a penalty when I file my 2021 taxes for not claiming the 2020 RMD in 2020 due to my investment company’s error? Also would I have to amend my 2020 return to reflect the 2020 RMD OR do I claim the 2020 and the 2021 RMDs on my 2021 return since that is the year I received the funds?

Re: RMD

Opus 17 — Wed, 26 Jan 2022 18:18:10 GMT

Fortunately, the CARES act suspended the RMD requirement for 2020, so you won't be penalized. You simply have two withdrawals in 2021, and you will pay regular income tax on them.

(Normally, yes, there would be a penalty for missing an RMD. You would not amend your prior return, because you only report what happened in that year on that year's return. You would report the missing RMD in the year you learned about it and calculate the penalty, but you can request a waiver of the penalty for cause, on a special form that may require you to file by mail instead of e-filing. But ignore all that for 2020, you are off the hook.)

Re: RMD

AmyC — Wed, 26 Jan 2022 18:21:27 GMT

@Opus 17 is correct! Form 5329 would have come into play except for 2020 not requiring the RMD.

Re: RMD

Hol67 — Wed, 26 Jan 2022 18:24:04 GMT

Sorry I forgot one more question about the RMD. Is it income that I have to pay capital gains tax on?

Re: RMD

AmyC — Wed, 26 Jan 2022 18:28:27 GMT

No, it is regular income, not capital gains.

Re: RMD

Opus 17 — Wed, 26 Jan 2022 18:57:54 GMT

@Hol67 wrote:

Sorry I forgot one more question about the RMD. Is it income that I have to pay capital gains tax on?

No.

Do you understand the reason for the RMD? The IRS or Congress does not want people to be able to amass large tax-deferred accounts and pass them down to their families without ever paying tax. The RMD requirement is that the owner (after a certain age) must withdraw at least that much money, based on the account balance and their life expectancy, so that someone eventually pays income tax on the account. In some cases, the RMD requirement passes down to the beneficiary even if the beneficiary is not yet 72-1/2. You can always withdraw more, if you want to spend the money on something, but you must withdraw at least that much.

That being said, all withdrawals from a qualified account like an IRA are considered ordinary income. You don't track what happens inside the account, as to whether the growth is due to price appreciation, dividends or interest. You just pay ordinary income tax on whatever comes out. That's a trade-off for the tax-deferred growth.

You could, if you wanted to, withdraw all the money and invest it with a regular stock broker. You pay all the income tax now, and in the future you would pay taxes yearly on the interest and dividends, but the capital gains would be taxed at a lower rate whenever you sell the shares. It's a complicated math question that would be more appropriate for a professional financial planner.