Penalty Withdraw

Forum|Forum|3 years ago
November 16, 2022
2 replies
32 views

Can you explain possible penalties for a required annual distribution from an annuity account?

Mycharo1

Level 4

If an account owner fails to withdraw a RMD, fails to withdraw the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline, the amount not withdrawn is taxed at 50%.

In other words, if your RMD was $10,000 and was not withdrawn by the applicable deadline, the penalty could be $5,000.

user17710879094

Level 4

I believe you may be referring to the penalties assessed when the RMD is not distributed in the proper amount. The penalty is calculated as 50% of the RMD shortage.

You may request a waiver, it would only be denied if there was no reasonable explanation and the missed RMD was not taken at all. You also need to indicate that you are taking reasonable steps to remedy the shortfall.

This would necessitate IRS Form 5329

see: https://www.irs.gov/pub/irs-pdf/f5329.pdf.

The following will provide additional information on the RMD and how it is calculated:
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions#:~:text=If%20an%20account%20owner%20fails,withdrawn%20is%20taxed%20at%2050%25.