taking incorrect RMDs

Submitted by Thomas Ferry on Thu, 2011-12-15 13:09

What next steps, if any, should a non spouse beneficiary of an IRA take (other than taking the correct RMD for this year) who just realized she was taking RMDs for the past 6 yrs (since she inherited the IRA) based on Table III and not Table I?

Also, what are the chances of this low income, 79 yr old being audited?

Thanks



Submitted by Peter Lingane on Thu, 2011-12-15 16:52

See Alan’s answer of November 29 to a similar query.



Submitted by Thomas Ferry on Thu, 2011-12-15 18:47

Thank you
Just reviewed form 5329 and have a few questions.

-the form says that if the custodian informs the taxpayer of the RMD amount, then the taxpayer can use the amount provided (I presume in lieu of calculating themselves). For calendar year’s ’04-’08, and ’10, the custoidan did the calculation and informed the taxpayer of the amount based on the wrong table. Whose responsiblity is this, and does the taxpayer still have to file form 5329?

-the form also says if you are filig for previous years, you have to use that previous year’s 5329 form. How are the previous years forms obtained?

-your answer provided on 11/29/11 says that the IRS may waive the tax penalty. Form 5329 asks that a check for 50% fo the amount not withdrawn be submiited with the form. Is that necessary? Seems excessive if it winds up being waived.



Submitted by Alan Spross on Thu, 2011-12-15 21:38

The IRS no longer requests a check for the penalty to accompany a waiver request. However, you make a good point with respect to the paragraph in the 5329 instructions stating “If the trustee, custodian, or issuer of the IRA informs you of the minimum required distribution, you can use that amount”.

If the person has copies of those figures provided to her by the custodian, she should not have to do anything except to retain them in the unlikely event the IRS ever asks about the shortfall. Since the error has now been discovered, she should make her 2011 and future RMDs using the correct table.

If she loses any sleep over this, then she can make up the difference and file a 5329 for each year. Old editions can be downloaded off the IRS site (link below). Again, no money should be sent with these forms, but the additional amounts distributed will be taxable in the year they are distributed if she chooses to do that.

http://www.irs.gov/app/picklist/list/priorFormPublication.html?value=532…



Submitted by Thomas Ferry on Thu, 2011-12-15 21:48

Thanks



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