RMD and IRS software question

[Sausalito789]

Boy I finally stumbled on how to ask a question. I've bookmarked the link, it's like a maze, awful website.

OK to my question.

Tammy Trogg has let's say 5 IRA's each with a different financial provider. She's up for RMD's this tax year but wants to draw her TOTAL RMD responsibility from just one IRA that is held with "Twister, Trust Me and Bloggs inc" and leave the other 4 IRA's alone.

Is the IRS software that determines RMD withdrawals smart enough to calculate that Tammy has met her overall RMD draw requirements for that tax year or is it going to calculate that she never met her RMD draws as the IRS system sees no evidence of RMD draw-downs from the other 4 IRA's?

Does the system have a global view?? One would hope so, I see that a party can draw all RMD from just one IRA...I'm just wondering what happens on the back end?

[dmertz · Accepted solution]

There seems to be no IRS software that checks whether or not one has satisfied their entire RMD for the year.  The IRS relies on taxpayers self-reporting missed RMDs.

The tax code permits an individual so satisfy the RMD of one of the individual's IRAs from another one of the individual's IRAs.  The IRS receives Forms 5498 from each of the IRAs reporting the amount of the required distribution for that account and the amount of any rollovers into the IRAs, and Forms 1099-R reporting distributions from the IRAs.  It would be up to an IRS auditor who questions whether the aggregate RMD has been satisfied to put all of that information together.

Because the IRS does not routinely check for missed RMDs, it's easy for one to accumulate penalties for missed RMDs (which would benefit the Treasury if the penalties were ever paid, so there is little incentive for the IRS to quickly detect missed RMDs).  The SECURE 2.0 Act created reduced penalties on missed RMDs and a new statute of limitations for the IRS to assess the excess-accumulation penalty.

[VolvoGirl]

IRS RMD FAQs

Can an account owner just take a RMD from one account instead of separately from each account?    Scroll down to Question 5

Retirement Plan and IRA Required Minimum Distributions FAQs | Internal Revenue Service