What to do about missed 2023 IRA requiured minimum distribution (RMD)?

[mikeburg]

​What procedures need to be done when a taxpayer misses get their 2023 IRA RMD, (required  minimum distribution)?

The IRA was transferred from one brokerage firm to another one during 2023.  The old brokerage firm failed to take out the

RMD and the new brokerage firm filed to do so too. 
The taxpayer was totally unaware until after January 1st, 2024, since it was usually deposited in the account held at the same brokerage firm as the IRA account.

What steps does the taxpayer need to take?

Are either of the brokerage firms liable for the 50% penalty?

Is the tax preparer subject to penalty if the taxpayer wants to ignoe the missed requirement?

Thank you for any & all help.

[abctax55]

Have your client take the missed RMD immediately.

Make sure the 2024 one is set up to happen before the end of the year.

Your client WILL get one From 1099-R for 2024, that has both amounts.

File F 5329 with the return (2023? or 2024?...) and request the penalty be waived.  

Prepare the client for a possible IRS missive; then you prepare a response:

"client corrected immediately, brokerage dropped the ball, system in place to make sure it doesn't happen again.

IF there's a penalty (the IRS almost always waived it in the past; there's talk they may now be less tolerant..no one knows...yet) AND there's proof the brokerage is the one at fault, then perhaps they could be held liable.  Or maybe be filling to write a letter to the IRS taking blame.  I have had that happen.

No, a preparer can't be penalized if a client ignores our advice.  I believe the IRS has the ability to track the omission down tho, and I'd guess they wouldn't be a forgiving if they find it themselves.

If a client of mine ignored my advise on THIS issue.... they'd be a former client.

[rbynaker]

I do exactly the same as abctax.  Back in the old "50% penalty" days, I never had a waiver request denied.  ProSeries has a place to write text for the waiver (I assume Lacerte has something similar) and "RC" should appear next to box 54.  I always state that it was an error due to [DarnGoodReason], it was corrected and a distribution was made on x/x/yy for the missed RMD.

Now that the penalty is "only" 25% AND there's a 10% penalty "correction period" I suspect the IRS will more actively reject reasonable cause (RC) waivers.  It's too early to tell but unless/until the IRS changes the 5329 form/instructions, I plan to continue using the RC waiver method if I think my client qualifies.

Read through the Part IX instructions on pages 8-9:

https://www.irs.gov/pub/irs-pdf/i5329.pdf

Rick

[mikeburg]

Thank you so very much!  mikeburg

[elsaf50]

Hi there, I think I have a slightly similar situation...

Parent passed away Jan 2024, not having taken RMD's for 2023 or 2024.  I understand that the RMD for 2024 should be taken by me, the non-eligible designated beneficiary (non-minor child of deceased).

My question pertains to the missed RMD for 2023, what should be done in that case?  Should Form 5329 be filled out on behalf of the deceased or should I fill out the 5329 and ask for a reasonable cause waiver of the penalty (and take the missed 2023 RMD myself)?

Thanks in advance for your time and assistance.

[qbteachmt]

@elsaf50

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