07 RMD taken in 08-what to do? | Ed Slott and Company, LLC

07 RMD taken in 08-what to do?

Hello: a client of mine did not take RMD in 07 yet took it out in 08. So are we o.k. if we report the whole withdrawal amount in 08? Or is there any extra form needed to be used to report this situation? Thanks!

The client is absolutely fine for 2008 - both distributions should be reported that year. The problem is 2007. Form 5329 can be completed to show the amount of RMD that was missed. Since it was taken out in 2008, he/she can request a waiver of the 50% penalty. The Form 5329 can be signed and sent in separately, no need to amend the 2007 return for it. In order for IRS to grant a penalty waiver they need to know (1). that the missed payment was withdrawn adn (2) there was a reason that it happened - could be communication problem with the custodian, illness, elderly person being forgetful, misinformation etc.

Thanks!
 

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