IRA RMD not made in year of death administrative waiver?

[Penumbrook]

Issue: Deceased person usually takes Trad IRA RMD in October. IRA Owner dies before instructing bank to issue RMD. Multiple beneficiaries attempt to submit paperwork to three separate IRA custodians to issue RMD before the end of year, but are unable to complete paperwork in time. 1) There is no exception on Form 5329. 2) There is no regulation (I can find) that covers this circumstance though this can't be the first time this has happened. Q: Is there an administrative procedure that allows for a waiver of the 50% penalty when this happens? I assume the penalty must be paid before the waiver is requested.

[qbteachmt]

Dates matter. Date of death?

See this article:

https://smartasset.com/retirement/penalties-waived-on-some-missed-rmds

And read on the SECURE Act provisions.

[Penumbrook]

Date of death is in 2022. We are working on a current year-end deadline and the client's IRA custodians are anticipating delays in the process.

[qbteachmt · Accepted solution]

"are anticipating delays in the process"

Taking the RMD is about a 15 minute process. The Executor (not the beneficiaries) would do this, as it is under the dead person's SSN. There are two weeks to do this one task.

"There is no exception on Form 5329"

You include an explanation for waiving the penalty, but they should not need to bother. The RMD is a snap. It might be allocations or distributions that take a while, when there are multiple beneficiaries and if that includes a spouse, etc. That complexity can delay things. Even then, two weeks?

[Penumbrook]

Thank you, qbteachmt, for your help on this. N-2022-53 gave me clarification on the beneficiaries responsibilities beginning in 2023. The notice does not appear to give the decedent a pass on the RMD in the year of death, which, after death, puts the onus on the beneficiaries (correct me if I am wrong). With seven siblings and three IRAs, we are hopeful that the issue will be resolved before the New Year. The loss of a loved one is hard enough. The complexity of deferred savings accounts seems to add a level of confusion that is almost cruel. My goal is give correct information to the grieving parties and to avoid having to file an abatement. We are only good guys if we can keep it simple. Thank you again!

[qbteachmt]

The decedent's RMD is not more complicated than before death.

"For the year of the account owner's death, the RMD due is the amount the account owner was required to withdraw and did not withdraw before death, if any."

"which, after death, puts the onus on the beneficiaries (correct me if I am wrong)." Their part is the next year:

"Beginning the year following the owner's death, the RMD depends on certain characteristics of the designated beneficiary and the distribution option chosen by the beneficiary."

Decedent RMD is done before the account(s) get inherited or distributed, based on the beneficiary designations/eligibility/options and/or the estate/will. Brokers can be slow, but since Oct? That's just crazy. Then again, my client got an apology gift from Schwab for how badly their estate dept handled a spousal inherited IRA, but even then, it was under 6 weeks.

[rbynaker]

I've never had any problems with the abatement after-the-fact.  Catch up on all of the missed RMDs and have a process in place to take them going forward, attach a note to that effect and use Form 5329 Part IX to request the waiver.  See instructions in the last page of the instructions:

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

[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

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Income Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte Tax Preparation programs, and you may be looking for support as an individual taxpayer using TurboTax. Please visit the TurboTax Help site for support.

And try this screen, for the various topics (subforums): https://ttlc.intuit.com/community/discussions/discussion/03/302

Your sign in user info here is the same one you can use over at the TurboTax forum.

Thanks.

[sjrcpa]

Elsa is driving around in circles. She's been through here at least 3 times.

[qbteachmt]

"She's been through here at least 3 times."

And OMG, updating 2 year old topics for inherited IRAs is one of the worst things to do, because from the covid pandemic forward, Congress has made so many changes. You have to look up what applies for the specifics of any scenario, including ages of the parties involved, as another issue comes from the IRS not finalizing some rules, either.

Benefits were never this hard to manage for others. It's like shopping at the Dollar Store: you never know what's on the shelf until you shop there.