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Yes, he must take the RMD for 2021 to correct the issue, and he must also make sure to take the RMD for this year too. I'd suggest you keep copies of all documentation now while he has so that if IRS asks for it, you don't have a mad scramble to find it later on. For what it's worth, I've never had one of these questioned either. I don't know why the broker should be confused. All they have to do is make the corrective distribution for 2021 now. They have nothing to do with the penalty at all.

For a trust that was not making required distributions? Without knowing the details, sounds like a potential breach of fiduciary duty. Beneficiaries paying tax on money not received? For a simple trust, earnings can be distributed within a reasonable period after the end of the year. Reg 1.651(a) uses the example of paying out 4th quarter earnings within 15 days of the year end.

Reminds me of the story about when the textile mills used to pay everyone weekly, in cash. One week John opened his envelope, then turned to the paymaster and complained his envelope was $2 short. The paymaster responded, "Yes, last week I overpaid you by $2, so I just deducted it this week." John nodded and walked away. The paymaster then called John back and said, "I could tell by your reaction you knew about the $2 overpayment. Why didn't you mention it last week?" John replied, "Well, I'm a reasonable man. I'm inclined to let it pass if a fellow makes a mistake. But when he messes up two times in a row, it needs to be called to somebody's attention."

It is not for the broker to do anything with the penalty. The taxpayer is supposed to assess on their personal tax return. The Taxpayer needs to direct the broker to calculate and distribute the 2021 RMD. The taxpayer needs to direct the broker to calculate and distribute before the end of the year the 2022 RMD. The broker needs to follow the taxpayer's instructions and then issue the 2022 1099R showing the total of both distributions. Then the Taxpayer comes to the preparer, who requests the waiver on the 2021 return indicating that the corrective distribution was taken in 2022 and will be included in income on the 2022 return. Tom Longview, TX

Penalty is 50% of the shortfall of RMD not taken. Correct the shortfall ASAP before the return is filed. See the instructions for part IX of form 5329 "Exceptions to the Penalty and how to fill out lines 52-55 to request the waiver. I've never had the penalty assessed for anyone that made the correction as soon as this was discovered and before the return was filed. By filling in these lines per the instructions, the software will not assess or include the penalty with the return.

Yep, my first ones were during high school too. Not a big deal since it was only 2 sheets of paper per year for many of the early years - one for federal, one for state. I can't claim super-nerd status as I don't have any spreadsheets.

Mine go back to my first return in high school. Pertinent info from each year is entered on a s/s. So, I guess I'm a super-nerd.

I have all my tax returns from when I first got married. I was always going to put the AGIs and tax liab on a spreadsheet -oops -the accounting nerd in me is showing.

Must be a fun work environment for the employees. I assume the firm will be holding some team building exercises, potentially behind bars.