topic Re: RMD2024 in Retirement tax questions

RMD2024

Phantom88- — Sun, 30 Mar 2025 15:35:05 GMT

My RMD 2024 was traded on 12/31/24 to satisfy requirement. The financial institution I work with only deposited the money on 01/03/25. 01/01/25 was New Year's Holiday. My bank received the money on the 3rd.

What should I do? I didn't get the 1099-R from the financial institution. Will I have to pay penalty?

Thanks!

Re: RMD2024

JohnB5677 — Sun, 30 Mar 2025 16:08:26 GMT

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.