RMD splitting IRA and 401k

Hi – a client came to me who has both an employer plan (Thrift Savings) and an IRA. He has been combining the RMD for both accounts and just taking it from the Employer plan. Going forward, he understands that we need to take some from each in 2020, but the question is – what has been people’s experience about the IRS penalizing the past few years of doing it the wrong way?



  • The penalty is typically waived once the late RMDs are made up and a 5329 is filed to request a penalty waiver. However, the client still needs to make up the missed IRA RMDs in order to file that 5329, therefore client will end up having taken unnecessary TSP distributions on which client has been taxed, and will also be taxed on the IRA makeup RMDs. Therefore, waiver of the penalty represents only a portion of the impact of this.
  • I am not aware of any situation where the IRS has relieved a taxpayer of RMDs for other accounts when they distribute extra funds from another account that cannot be aggregated.


  • Because traditional IRA RMDs are not permitted to be satisfied by distributions from any account other than the individual’s traditional IRAs, these circumstances have resulted in the IRA RMDs not having been satisfied and are subject to a 50% excess accumulation penalty if not corrected and a waiver of penalty requested.  The IRS has no authority to permit IRA RMDs to be satisfied from a non-IRA account.
  • The IRS has the authority to waive the 50% excess accumulation penalties if the missed IRA RMDs are taken late, but has no authority to waive the penalties if these IRA RMDs are never taken.  The IRS has not been actively pursuing these penalties, but there is generally no statute of limitations on the IRS being able to assess the 50% excess accumulation penalty, because there generally has been no reporting on Form 5329 to start the statute-of-limitations clock running.
  • The client will need to take each year’s IRA RMDs late and request waivers of the penalty by submitting each year’s Form 5329 as described in the instructions for Part IX of Form 5329 for waiver of tax.  These distributions will be taxable on the tax return for the year in which the distributions are taken, along with the RMDs for the current year.


THanks everyone, that’s roughly what I was thinking, and I appreciate the feedback



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