50% Waiver to non 1099-R distribution

[Evan S. Golar]

50% Waiver to non-1099R distribution

A client who is required to take an RMD from an inherited IRA doesn't take it for 2018. Reason is irrelevant - but simply there was a screwup with the custodian.
An extension was filed for 2018 to allow more time to receive the 2018 RMD prior to filing the return to request the 50% waiver.
What happens if by October 15th the RMD isn't received? Is the 50% waiver request invalid because the return should have been filed by Oct. 15th, or does it carry through so long as the
RMD is taken prior to filing the return?

[Catherine]

Is the problem still with the custodian?  If so, it *might* be possible to get the penalty waived if you can show consistent efforts to resolve it and the error being on the custodian's part.  However, unless they pinky-swear your client will get it soon, I'd transfer to a NEW custodian after discussing the missing RMD issue and getting a promise to get it distributed instantly.  That might actually be fastest.

[Edsel]

I am amazed at the errors the custodians make, and nothing ever happens to them.  IRS is more interested in harassing the taxpayers with penalties of the sort than to do anything to Fortune 500 custodians.

Custodians make all sorts of errors.  1099-Rs that are late.  1099-Rs that are wrong.  Failure to distribute RMDs.  Refusal to correct income documents that are wrong even when the error is pointed out.  Some of them claim they have no responsibility to distribute RMDs because "the individual may have other retirement accounts with other custodians and might wish to skew the distribution from one account to the other."  Extremely remote excuse.

To reflect on the original question, if the error is easily shown to be of the custodian, they could be threatened with a civil suit for the amount of the penalty.  That might get their attention, because a favorable ruling in this case might be taken as a precedent, so the payment of a few hundred dollars of penalty might be a precursor of substantial amounts of money.

I just hate to see them get off scott-free, when the taxpayer has to unjustly suffer.

 

 

[RitaB]

On ‎8‎/‎23‎/‎2019 at 9:43 AM, Evan S. Golar said:

50% Waiver to non-1099R distribution

A client who is required to take an RMD from an inherited IRA doesn't take it for 2018. Reason is irrelevant - but simply there was a screwup with the custodian.
An extension was filed for 2018 to allow more time to receive the 2018 RMD prior to filing the return to request the 50% waiver.
What happens if by October 15th the RMD isn't received? Is the 50% waiver request invalid because the return should have been filed by Oct. 15th, or does it carry through so long as the
RMD is taken prior to filing the return?

Evan, in June 2019, I had a client to FINALLY take withdrawals to cover RMDs for 2017 and 2018.  (They blamed the custodian, but come on, I told you two years running you had to take RMDs, the custodian probably gave you paperwork you didn't read, etc.)

I completed Part IX of 2018 Form 5329 and attached a statement to it when he made the withdrawals in June 2019 (the due dates for both RMDs were in 2018:  4/01/18 and 12/31/18), and he mailed the Form 5329 by itself.  I don't know the answer to your question, but I'd go on about my business and complete the 2018 Form 1040 and deal with the waiver request when the RMD withdrawal occurs.

[Abby Normal]

The instructions make it sound like you don't have to complete the withdrawal, before you file the return.

The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329