Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Elderly Mother Forgot to Withdraw from IRA in 2010
Old 12-06-2011, 11:31 AM   #1
Recycles dryer sheets
 
Join Date: Jul 2009
Posts: 296
Elderly Mother Forgot to Withdraw from IRA in 2010

Just got the "what do I do" call today ... appears she confused 2009 holiday on IRA withdrawals with 2010 ...from initial read on the topic, she should:
- Withdraw both 2010 and 2011 amounts prior to end of CY2011
- Complete appropriate IRS forms 1040 and 5329
- Include penalty (50%) in tax payment for 2011
- Include letter explaining the reasonable error rationale for failing to withdraw in 2010 (and, hope IRS is persuaded to return your penalty)

Is this generally accurate - would appreciate any other thoughts!

George
__________________

__________________
stephenson is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-06-2011, 11:36 AM   #2
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Best to consult with a tax pro here -- but I don't think you include the penalty in this process:

Straight from the horse's mouth, so to speak:

Retirement Plans FAQs regarding Required Minimum Distributions

Quote:
Yes, the penalty may be waived if the account owner establishes that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. In order to qualify for this relief, you must file Form 5329 and attach a letter of explanation. See the instructions to Form 5329 for all the rules on how to apply for this waiver.
The last page of the PDF instructions for the form shows how to fill in Form 5329 if requesting a waiver from the penalty under the "Waiver of tax" heading. This makes it sound like you don't include the penalty amount, and if the IRS isn't satisfied with the letter of explanation they may come back and "request" payment of the penalty.

[Disclaimer -- I am not a CPA, tax lawyer or a tax professional, blah blah blah.... ]
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 12-06-2011, 12:17 PM   #3
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: 19th Hole
Posts: 2,528
Do not send the penalty. I have been told the IRS is somewhat understanding in cases like yours. Consiult a tax pro and even consider going to an IRS office and speak to someone in person about your situation.
__________________
A totally unblemished life is only for saints.
frayne is offline   Reply With Quote
Old 12-06-2011, 12:23 PM   #4
Thinks s/he gets paid by the post
Free To Canoe's Avatar
 
Join Date: May 2008
Location: Cooksburg,PA
Posts: 1,738
The bank where my mother has her IRA calculates and distributes the RMD automaticly. My mother thinks it is all "interest" so thank goodness for the banks set up. Maybe something "automatic" would be helpful for the OPs Mom?
__________________
Free to canoe
Free To Canoe is offline   Reply With Quote
Old 12-06-2011, 01:20 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,633
Quote:
Originally Posted by frayne View Post
Do not send the penalty. I have been told the IRS is somewhat understanding in cases like yours. Consiult a tax pro and even consider going to an IRS office and speak to someone in person about your situation.
+1 How about filing an amended 2010 return with the RMD included along with an explanation. If you did it as the authorized filer on your mother's behalf you could explain that Mom was having trouble understanding her taxes and asked you to help for 2011 and when you went over her 2010 filing you discovered the error.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 12-06-2011, 01:58 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
A few year ago a similar thing happened with my mother. I thought that the new custodian (Schwab) would automatically withdraw the RMD (they don'). I discovered the error prior to filing her taxes so I withdrew the money in March but treated it like it was withdrawn the previous year. I attached a letter and had no problems.
__________________
clifp is offline   Reply With Quote
Old 12-06-2011, 02:49 PM   #7
Recycles dryer sheets
 
Join Date: Jul 2009
Posts: 296
Thanks, Everyone!
__________________

__________________
stephenson is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
IRA Withdraw or Other Funds First? marko FIRE and Money 16 09-25-2011 02:54 PM
How Much Can I Withdraw from Trad IRA and Pay No Income Tax? kelso FIRE and Money 10 07-05-2011 08:44 AM

 

 
All times are GMT -6. The time now is 10:01 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.