Missed RMD

[lrhenry04]

I have had a client for 4 years and was notified today that there is missing RMDs from years back to 2012. She retired the first time (age 75) in 2012 but went back to work in 2016. The city that she works for switched from a 457 Plan to a 414(h) during that time and she never paid into the 457 again after the 2012 separation. 

Known: She missed her RMDs for 2012, 2013, 2014, & 2015.

Unsure: Would she still be required to take RMDs from the plan during the years that she was re-employed with the city? 2016-2019 

She retired the 2nd time in October 2019. 2020 was waived for COVID but she did miss 2021.

I plan on having her take the missed RMDs and file Form 5329 (for each year) to request a waiver of the 50% penalty.

Should I go all the way back to 2012 or just address the 6 years that would be auditable?

Thanks for any input.

[BobKamman]

She was 75 in 2012, but did not start taking distributions or roll the account over to an IRA for the four years she was retired?  

I had a similar situation with a client who had two IRA accounts but was taking RMD from only one.  This went on for four or five years.  We caught it before the 2021 return was filed so we filed the 5329 with it, and he withdrew the accumulated amount right away.  IRS has enough of a paperwork crisis, filing multiple 5329's might be technically correct but I wouldn't waste their time.  Maybe add a line to the one for the most recent year, "Taxpayer agrees to file additional forms for previous years if requested by IRS."  There's no statute of limitations on unfiled 5329's, right?  But there's no late-filing penalty for them either.  Or maybe there is, but if it's based on the amount of penalty owed, then it's zero if the penalty is abated.  And IRS always abates.  

[CUSO]

I do not believe she would be required to take the RMD for the years that she went back to work.  

[qbteachmt]

"Known: She missed her RMDs for 2012, 2013, 2014, & 2015."

Remember that RMDs used to kick in at 70.5. I believe 414(h) and still working means taking it at 70.5, but 457 and still working means not required to take from the current employer's plan (still needing to take from other employer plans).

Time to do some research and break some bad news.

[BobKamman]

Does the penalty continue for every year the RMD is missed, even if new RMD's are not required?  I'd have to look it up.  

[qbteachmt]

There is a provision for asking for waiver, but this is going to be complex.