Not Notified of RMDs

[David]

I have 2 clients who have RMD problems.

The first client is in her 40s and inherited an IRA five or six years ago. She was not aware that she had to take RMDs and the financial institution did not advise her until 2015.

Does she have to get caught up for the past years or just start taking the RMD in 2015? Is it necessary to file an explanation to abate the penalty for RMDs not taken in previous years or does she just need to make sure she takes and reports RMDs each year going forward?

The second clients are in their late 70s and were taking RMDs since 70 1/2. For some reason no RMDs were pulled out of the accounts by their financial institution in 2015. According to the clients the financial institution always distributed the RMDs to them every year in the past.

Is there any penalty relief for these TPs under those circumstances?

Thanks.

[jasdlm]

The RMDs are the taxpayers responsibility.  For the clients in their late 70s, file a 5329, complete part IX, and file with the 2015 tax return without adding the penalty.  I have always had good luck under that scenario.  (The clients need to take their late RMD immediately.)

With respect to the 40 year old client, I'm not sure what the best approach is, other than it needs to be quick.  I always use 'correction of the error as soon as the taxpayer became aware' as one of my statements (assuming it's true) in my response letters.  You will still need the 5329 - probably filed stand-alone, and a letter with a good explanation.

Eager to hear what others think is best in this second scenario.