Financial Advice Q&A

Occasional Visitor
Posts: 1
I didn't take my RMD, what's next?
[ Edited ]

Re: page 52., The American Legion Magazine, April 2014. I have just spent 45 minutes of my most valuable time trying to find out how to ask a question of J.J. Montanaro . I did not take my required distribution of IRA funds. In past years, I took a distribution because I needed the money. For 2013 Tax Year, I did not take any distribution. My broker did not remind me about this. MLPF&S say it was about office turnover, seeming to admit that they may have had a responsibility to remind me. My tax preparer H&RBlock put a note in my return saying I took the minimum distribution as soon as I became aware of the requirement--which I did. As a certified financial planner, what are the next six or seven steps that I should take or that will happen in this situation? Alan 8:00 a.m., 14 May 2014

Posted: 2014-05-14 08:01 AM
Other Answers: 1
Community Manager
Posts: 398

I'm sorry you had to spend time trying to find me but am glad you did because finding yourself on the wrong side of an IRS rule can be stressful to say the least!  


Let's start with the bad news.  As you probably now know, there is a penalty equivalent to 50% of the RMD you should have taken. Not fun! Now to the good news: The IRS is empowered to waive the penalty if "you are taking reasonable steps to remedy the shortfall" and the shorfall was due to "a reasonable error." I don't know enough about your situation to say for sure if this is the right approach but it's probably an angle worth pursuing.  I'd encourage you to check back with your tax preparer to get their input.


If they're in agreement, they'll likely tell you to file IRS Form 5329 and attach a letter requesting the IRS waive the tax.  Page 7 of the instructions for the form lays out the specific instructions on how to complete the form and how to request the waiver.  


That's not six or seven steps, but hopefully it helps. Good luck!



Posted: 2014-05-14 09:28 AM


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