Late RMD Penalty - File form 5329 and letter of penalty forgiveness with TurboTax online

[dmertz]

If you have not entered any Forms 1099-R that would, after clicking the Continue button on the page that lists the Forms 1099-R that you have entered, cause TurboTax to ask if you completed your 2021 RMD, it's difficult to get TurboTax to include Form 5329 Part IX requesting the penalty waiver for having completed the RMD, albeit late.  Easiest in that case would be to complete Form 5329 and explanation statement manually outside of TurboTax and include it with your printed and mailed tax return.  If TurboTax does ask you if you completed your RMD, answer No, then complete the rest to indicate that you subsequently completed the RMD in 2022 and TurboTax will generate and include Form 5329 Part IX with the waiver request.

[odyinpdx]

Given the backlog at the IRS, I prefer not to file by US mail.  Can I e-file my 1040 through TT and print, fill out, and send in by US mail just Form 5329.

[DianeW777]

Yes. Include the Form 5329 with your e-filed return. Then you can create a statement and mail it with a copy Form 5329, just don't forget to sign it.  Or you could wait for them to request it,  However as indicated, it's just as simple to print and mail the tax return that includes the statement.

@odyinpdx

[odyinpdx]

Thanks Diane.  I am a bit confused, I thought we couldn't include Form 5329 (for a missed RMD) in an e-filed return from TTO.  When I search for Form 5329, it doesn't show up and other "Googling" seems to indicate that in some cases (including missed RMD's), form 5329 isn't available for e-filing.

[MarilynG1]

The only way to get the RMD questions to come up in TurboTax and generate Form 5329 is to enter a 1099-R and indicate that 'did not take all RMD' .

You will need to enter what the required RMD amount is, and an explanation of why it was not included in the distribution. 

Your broker is responsible to see that you take your RMD properly every year.

Otherwise, you will prepare/mail Form 5329 with your tax return.

Click this link for more info on Form 5329. 

[ragdoll_74]

Thanks so much for your help with this - I do have the desktop version so was able to step through this perfectly!!  Just to confirm then, am I still able to file electronically, so the form 5329 and explanation will be included?  Or do I need to print that out and file via paper and mail?   Thank you again!

[AliciaP1]

As @DianeW777 posted earlier in the thread, your Form 5329 will e-file with your return, but you will also need to print a copy and mail that in with your explanation statement.

[fanfare]

@ragdoll_74 

The Turbotax CD/download will attach your explanation.

The TurboTax Online will not.

Which version are you using?

[ragdoll_74]

I'm using the CD Premier edition for Windows.

[GoldenQuestions]

DaveF1006 had the correct answer for me. I hope this will help other people too.  Follow his instructions.

I was able to e-file my taxes.  I did not have to send anything via regular mail. Both returns were accepted.

I used TurboTax Deluxe Desktop Edition and the software will generate a substitute 1099R for you to fill out with room for an explanation as to why you took your RMD late.

It helps if you call your broker and find out exactly what your RMD was for 2021. And if you get your Broker's EIN Number, address etc.

From what I understand from my broker, my RMD for 2021 will actually need to be claimed on my 2022 Taxes because it was taken in 2022, but I guess I gave the IRS a heads up for next year and maybe they won't charge penalties.

Thank you to everyone who replied.

[hlatt32]

Hi Mac-user:

I am having the same problem- not withdrawing rmd for 2021. Are your suggestions valid for 2021 also.?

Thanks

Htin

[macuser_22]

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@hlatt32 wrote:

Hi Mac-user:

I am having the same problem- not withdrawing rmd for 2021. Are your suggestions valid for 2021 also.?

Thanks

Htin

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Yes.

[otnanct]

How do I file form 5329 for a late RMD for my IRA

[macuser_22]

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@otnanct wrote:

How do I file form 5329 for a late RMD for my IRA

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You will need to file a 5329 form and request a waiver of the penalty. (The waiver would only be denied if there is no reasonable explanation and the missed RMD was not taken at all.)

Unfortunately this can only be done using the "forms" mode that is only available with the desktop software if you do not have a 1099-R to file.

If you do have a 2021 1099-R to report then the RMD question in the interview will go to the form 5329 waiver interview if you say that the 2021 RMD was not taken.

If you are using the CD/download version:

Enter the forms mode and click on open form. Type in 5329. Choose 5329-T for the taxpayer (first person listed on your tax return), or 5329-S (for spouse - 2nd person on tax return).

Scroll down to Part IX line 52 and enter the RMD amount that should have been taken. On line 53 enter the amount of the RMD that was actually taken (probably zero if it was missed).

Then in the box right under line 53 "Waver of Tax Smart Worksheet" enter the same amount as line 52 (the RMD amount). Then click the "Explanation" button and enter the reason for missing the RMD and your statement requesting a waver.

You will not pay any penalty now until the IRS determines if it will grant the waver, then they will inform you if you owe the penalty.

OR - if using the Online version and have no 2021 1099-R to file, you will have to prepare the 5329 manually .

Download the 5329 form from the IRS website and fill it out the same as above. Print and mail your return with the 5329 form and explanation attached as described in the 5329 instructions.

The 2021 5329 must be attached to your printed and mailed 2021 tax return and cannot be e-filed.

[NOTE: You can only use this method if you are requesting a waver of the penalty and there is no taxable amount on the 5329 form line 55 that must be transferred to the 1040 form]

From 5329 instructions:
Quote:
"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 reques for a waiver. "

Download blank 2021 5329 form here:
https://www.irs.gov/pub/irs-pdf/f5329.pdf
https://www.irs.gov/pub/irs-pdf/i5329.pdf

[Bdlllcarroll]

Just to add to the comments. In my case the RMD wasn’t made in 2022 so there wasn’t anything to report. A lot of the posts I read say you have to enter a 1099-R in order to get to the 5329. I opened the 1099-R that rolled over from the prior year and entered $0 in the gross distribution and taxable amount boxes. This allowed me to continue through the screens. As others mentioned, when you get to the screen that shows your 1099-R’s you click continue and click the box that says “I did not receive all the RMD for 2022”. At that point TT allows you to enter the amount that was required, the amount you actually received, the amount of the RMD you want the extra tax to be waived and an explanation. It completes the 5329 correctly and adds the statement attachment, both of which will be part of your efiling.