Substitute 1099-R, 4852 for 2021 & 2022

[dspsqu2]

This year (2021) I discovered that my RMD was not sufficient. I filed out a form 5329 and mailed it the other day to the IRS. Today I contacted ML and requested a "corrected" 1099-r for 2021. They said no to my request since the shortfall funds were taken out in Jan. 2022 and the additional funds would show on my 2022 1099-r. My question is how to I precede from this point.

1- TT has a procedure to fill out a substitute (corrected) 1099-R & create a form 4852. I started that procedure.  

2- How is this handled when it comes to 2022? My 1099-r will show RMD + the 2021 shortfall for a total greater than I would like.

4- Wouldn't that require me to pay taxes that I don't owe?

5-I just read in the discussions that you should not send in the 1099-r that ML generated if you fill out the 4852. Is this true and how does TT handle it?

I would prefer a corrected 1099-R which would be a much cleaner for filing. That’s not happening unless the IRS forces ML to send the corrected form.

[RobertB4444 · Accepted solution]

In this instance ML is correct.  The two 1099-Rs reflect the actual amounts received in 2021 and 2022.  You have already sent in the 5329 requesting the penalty waiver and you timely withdrew the excess as soon as you discovered the error.  But the excess was withdrawn after the December 31 deadline and if ML adjusts the 1099 they will be showing withdrawals that did not occur in the calendar year.

So you should not adjust the 1099 for 2021 or for 2022.  You will have a higher income in 2022 to reflect the reality that you received more money in that calendar year.  The same is true in 2021.  The 1099 reflects the reality that you withdrew less in the year than you should have.

The 5329 that you filed needs to be filed separately for each year effected by the issue, by the way.  You don't mention whether this issue is a multiple year issue.

If the IRS comes back to you and refuses to waive the penalty for whatever reason and the error was definitely your broker's then I would approach them to cover your fine.  

But use the actual 1099-R for each year.  The IRS is matching those from year to year.  If the forms were corrected there would have been no need to file the 5329 with the IRS.

[fanfare · Accepted solution]

When you make up a shortfall in 2022, it goes on your 2022 tax return. whether you like it or not.

The good news,  IRS never rejects your waiver request if you acted timely to correct the situation.

[dspsqu2]

Thank you for your reply and clearing up my confusion. I will use the actual 1099's for each year. The shortfall is just for 2021 and I will make sure it doesn't happen for 2022 so there will be no need for another 5329 in 2022.

[dspsqu2]

Thank you for your reply. I have 2 traditional IRA's. On is a mutual fund that automatically sells share at yr end to fulfill RMD. The other is a broker account with ML and for years the advisor would tell me that I was on track. But time has a way of changing a good think. The advisor is no longer advising instead I get bombarded with notification emails. My mistake was not looking at EACH ONE which would have told me I was in trouble for 2021.

Live, learn and hope the IRS is sympathetic.