Incorrect Form 5498 due to settlement agreement
I have recently settled a lawsuit where I was forced to relinquish half of the assets from an inherited traditional IRA and a Roth IRA to my half-brother. The bank already sent in Form 5498 (stating the Dec. 31, 2018 totals) telling the IRS that I was the sole owner. Now we have asked the bank to issue corrected Form 5498 forms based on the new totals as a result of the settlement agreement. The bank however, is telling us that the deadline has past to submit corrected forms. When I went to the IRS website, I didn’t see any deadline for submitting corrected Form 5498 forms.
Since I’m the only one the IRS believes is the owner BUT now I only own about half of these two accounts, it is painfully clear to me that these forms need to be corrected; otherwise, the IRS will expect me to take a larger RMD (for this year) than I would need to. What do I do here? Any feedback is most appreciated.
Permalink Submitted by Alan - IRA critic on Mon, 2019-11-04 00:44
What was the date of death, and what is the effective date that 50% of the inherited IRA was awarded to your HB? If after the DOD, this is probably analagous to the situation where part of an IRA is transferred to a spouse as a divorce settlement. If that IRA owned was subject to RMDs, they must take out the full value RMD for the year half the IRA was awarded. The receiving spouse did not have an IRA balance on the prior 12/31, therefore the original IRA owner is responsible for 100% of the RMD for that particular year. In later years, any RMDs will be based on each spouse’s year end balance. Therefore, dates matter. An IRA custodian must revise a 5498 for errors made, and the dates here determine if they made an error or not.