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New Member

RMD Taken One Year Late

My Brokerage account was set to pull 2018 RMD from my IRA MM Fund and send me the check in one installment. (I had similar set up for RMD in 2017 also). However, shortly before the set distribution date in 2018,  I bought a stock with money from the same MM Fund thereby leaving insufficient funds to draw my RMD from.  I totally forgot about this set up and  discovered this issue now as I sat down to do my taxes with Turbo Tax Premier. I understand there is a steep IRS penalty for late withdrawal. I am seeking a solution to avoid this penalty. Can you please help?

Thanks,

Samar

5 Replies
Highlighted
Level 14

RMD Taken One Year Late

unless you turned 70.5 in 2018, I think you are out of luck.  The IRS is clear that the RMD must be taken by 12/31/18

 

see the link below and maybe you can figure something out

 

https://www.irs.gov/newsroom/irs-reminds-retirees-of-april-1-deadline-to-take-required-retirement-pl...

 

sorry

Highlighted
Level 15

RMD Taken One Year Late

First, if you have not taken the missed RMD, take it ASAP so you can tell the IRS in the explanation statement that it has been taken.

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 2018 1099-R to report then the RMD question in the interview will go to the form 5329 waiver interview if you say that the 2018 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 2018 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 2018 5329 must be attached to your printed and mailed 2018 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 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 request for a waiver. "

Download blank 2018 5329 form here:
Form: http://www.irs.gov/pub/irs-pdf/f5329.pdf
Instructions: http://www.irs.gov/pub/irs-pdf/i5329.pdf

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Highlighted
New Member

RMD Taken One Year Late

My wife's financial manager failed to withdraw/report her 2019  RMD until Feb 10th 2020. At that time taxes on the RMD were pre-paid to the IRS. A letter from TRANSAMERICA (the annuity holder) states they must report this via a 2020 1099R. 

I therefore plan to omit this RMD from our 2019 return. 

Can I report these pre-paid taxes to reduce our 2019 taxes due? If so, how/where?

Highlighted
Level 15

RMD Taken One Year Late


@CDY wrote:

My wife's financial manager failed to withdraw/report her 2019  RMD until Feb 10th 2020. At that time taxes on the RMD were pre-paid to the IRS. A letter from TRANSAMERICA (the annuity holder) states they must report this via a 2020 1099R. 

I therefore plan to omit this RMD from our 2019 return. 

Can I report these pre-paid taxes to reduce our 2019 taxes due? If so, how/where?


No.  Tax withholding in 2020 goes on your 2020 tax return  next year.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Highlighted
Level 14

RMD Taken One Year Late

@CDY - did you read the very well written approach from earlier in the thread by @macuser_22 ?   your goal is to get a waiver from the 50% penalty from the IRS.