2018 Distribution
We submitted a distribution form for a client to be done in 2018. My BD had some connectivity issues and is stating that they never received the request and subsequently the distribution was not executed in 2018. The BD is telling me they will not correct this and the client should seek advise from their tax advisor. Is there a way to have a client take an IRA distribution in 2019, but code it for 2018? Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2019-01-03 16:23
No. Client should make up the late RMD ASAP and will have to file Form 5329 with 2018 taxes to request the penalty be waived for reasonable cause. The IRS will waive the penalty, but there will be two RMDs taxable in 2019 as a result. Client could pursue damages for the increase in total taxes over the two years, but there is no IRS based solution to erase the error. The IRS will go by the 1099R or lack of in this case for 2018.
Permalink Submitted by Scott Gegerson on Thu, 2019-01-03 16:46
Its acctually not an RMD, its an early withdrawal, sorry I should have mentioned this as well.
Permalink Submitted by Alan - IRA critic on Thu, 2019-01-03 17:03
Apparently, client preferred that this distribution would be taxable in 2018 instead of 2019, but reporting it on the 2018 return without a 1099R will eventually become a hassle much later when a 2019 1099R is issued a year from now and the IRS expects to see that included on the 2019 return. I think if client reports it in 2018 with an explanatory statement, and does the same in 2019 stating that the distribution was reported in 2018 will not fly with the IRS and will take a couple years to be eventually hashed out.
Permalink Submitted by Scott Gegerson on Thu, 2019-01-03 19:21
Thank you