I have spent hours reading through the forums, trying to gather information for my particular situation. Although my situation is not entirely different from what I've read, I do have some different nuances that apply, and have been receiving some conflicting information as I speak with multiple CPAs for guidance.
I inherited a 401k from my dad, who died prior to 70 in 2005. The Custodian created a 401k in my name after his death, and documentation I received from the custodian was that I could take the funds out, or leave it in there and watch it grow. The 401k has changed custodians a few more times over the years, and I was never alerted to needing to close out the account or take RMDs, through all of those changes. No documentation, no letters, and custodian changes went through every time, with no alert. This 401k has been through 4 different custodians.
The latest custodian who took over the account maintenance this year sent me a letter the end of March stating that the account needed to be closed out as I was required to take the full amount out, and 2 days later I received the check (minus 10% fed tax), along with a letter stating I had pay the IRS 50% in penalties and closed out the 401k. As I tried to get more information, I was also informed I was unable to retrieve any previous missing statements for the previous years and the custodian stated the only way I could receive that information was if I was filing for divorce and it was needed for our divorce proceedings.
I'm trying to gather the right direction from multiple accountants, and everyone has a different thought on what to do go forward (file now, file next year, go to court, request an official ruling from the IRS, etc).
1. Do I pay the estimated taxes that I'll owe for this amount immediately? To show that we found an error and are trying to correct it immediately?
2. Since I've already filed my 2018 taxes, the accountant is recommending I wait until next year to file the 5329 along with my 2019 taxes. He stated that it will draw less attention and perhaps make requesting a waiver easier. However, I want to find closure to this issue as soon as possible so I don't have to worry about this for an entire year and then wait to see if a waiver is approved. With that in mind, what should my next step be? 5329 for 2009 along with a 1040X for that year as soon as possible?
3. Any recommendations on how to format the waiver letter and what detail to put in here? I have received incorrect advice from the custodians, and based on the lack of communication and alerts from all of the custodians, I really had no idea I needed to take action on the account to close it out and take RMDs. Any documentation I received from the custodian was either my quarterly/yearly statements, or the generic fund allocation recommendations and fund performance newsletters.
Thanks so much in advance for your guidance!