how is RMD cross-checked

Submitted by abraham boznick on Sun, 2019-12-29 07:49

If a person has multiple IRA accounts in Ameritrade, Fidelity, etc. How would RMD information be cross-checked and calculated by IRS as it is coming from multiple account? For cross-check and calculation purpose would IRS also get the information about the person age, and/or disability status (for inherited IRA)? Or the IRA holder has to supply this information to IRS?



Submitted by David Mertz on Sun, 2019-12-29 14:26

  • IRA custodians are required to report to the IRS on Forms 5498 the year-end FMV of IRAs and whether the IRA participant is required to take an RMD.  The custodians are also required to report on Forms 1099-R the amounts of any distributions made to the participant from IRAs.  The IRS can combine that with the individual’s age to determine the total amount of IRA distributions the individual is required to receive for the year and compare that to the amount of distributions actually received.  Disability is not a factor in determining RMDs.
  • Unless you provide to the custodian of an inherited IRA the information necessary to determine if the beneficiary is subject to an RMD for a particular year with respect to the account so that the custodian can accurately prepare Form 5498 for that account, the IRS generally will not have sufficient information to determine the amount of RMD that an individual is required to receive with respect to that account.
  • If the IRS believes that an individual failed to complete the RMD for a particular year, the IRS would bill for the 50% excess accumulation penalty and it would become the responsibility of the individual to show why the bill is incorrect.  The IRS doesn’t yet routinely enforce compliance; failure of the IRS to assess and collect this penalty represents a significant amount of lost revenue to the Treasury.


Submitted by Alan - IRA critic on Sun, 2019-12-29 14:38

  • The IRS heavily depends on IRA custodians to administer RMDs for the accounts they hold, but they do not require a person to complete the RMD for their account, as they are aware of the aggregation rules. If the IRS wants to check if a person has met their total obligation, they (and the taxpayer) receive Form 5498 from each custodian showing the prior year end account balance, and they already know the person’s age.
  • For an inherited IRA, all distributions are penalty free and reported on the 1099R with Code 4 (death distribution), so it does not matter if the person is disabled. This is also immaterial for owned IRA RMDs since these only occur after age 59.5.
  • For owned IRA distribution prior to 59.5, the person can supply disability info to the IRA custodian to have the 1099R coded 3 (disability), or if the custodian fails to show code 3, the owner can file Form 5329 to override the 1 code with the disability exception.


Submitted by abraham boznick on Sun, 2020-01-05 23:22

What I meant that under new stretch rules, the 10 year rule does not seem to apply for disabled beneficiary. How does the custodian (brokerage house) notify IRS about the disability status of the beneficiary?



Submitted by Alan - IRA critic on Mon, 2020-01-06 00:18

The IRS will have to provide guidance on several issues, and this is one of them. A beneficiary distribution will be coded 4 on the 1099R under current guidelines as the disability code only applies to owners, not beneficiaries. Perhaps the IRS will modify the 5498 to require custodians to check a box for “eligible beneficiaries” or alternatively for 10 year rule beneficiaries. The IRS is not going to be able to improve on beneficiary RMD compliance without more reporting requirements from custodians. What they come up with might indicate how serious they will be in pursuing compliance with Secure.



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