Tax penalty for not taking RMD on Inherited IRA
My mother passed away on Dec. 20, 2014. She always waited until the end of the year to take her RMD and died before taking it in 2014. I understand that the responsibility for her 2014 RMD falls to her beneficiaries (my 4 siblings and myself), and we have done that. However, we were unable to take her RMD before the end of 2014 because we did not have a death certificate yet, let alone have Inherited IRA accounts set up.
My questions is about how to ask for a waiver on the tax penalty for failing to take the RMD in the year of my mother’s death. I know I need form #5329, but does each beneficiary ask for a waiver independently? Do I do it for the whole amount as executrix? Do I file it with my 2015 taxes or do I just file the form separately?
Permalink Submitted by Alan - IRA critic on Wed, 2016-04-20 19:53
The IRS will certainly waive the penalty in this situation. However, the obligation technically applied to 2014, so everyone needs to file a 1040X for 2014 with a 5329 attached requesting the waiver for reasonable cause. This is true even though the taxable income for that RMD as well as your 2015 RMDs will be reported on your 2015 return. If only one of you took the makeup RMD, then only that person needs to file the 1040X for 2014. If the IRA was left to individuals and not to the estate, the executrix does not file a 5329, just the individuals who took the makeup distribution.