Institution missed my 2016 RMD!!!

[kaneohe]

.......................

An excellent argument but sadly I didn't take the w/d in Jan. and won't be able to prove it, though I'll do it today! ........................

didn't you say the 2016 RMD was withdrawn just slightly late in early Jan 2017?

 

[Rosedala]

Please excuse my stupid question, but here I go. Who controls your process?

When I enter a deduction on Schwab to transfer something out of my IRA, it happens at midnight on that day or the next day at the latest. Currently I'm getting out the dividends in cash, less of course the amount I state withheld for state and federal taxes which they pay to IRS & FTB. Are you saying that if you ask your investment firm to transfer money from your IRA to your brokerage account there's a two-month delay? If that's the case, totally understand transferring to another investment house. Think -- Schwab (or Fidelity / Vanguard -- they're also automated so you control timing like with Schwab)
As to tracking more than 1 RMD, why not combine them & take from 1 account? KISS (keep it simple s.)

Hey Gail don't say that, I'm glad you asked. I control the process...partly, by instructing how much RMD to deduct for what year and when. Then... it's up to them to follow the simple instructions. I'm old - I don't like automated transactions if I can help it. LOL!

I've done transfers to and from institutions and don't remember any taking 2 months!!! If you refer to the advance time to send them instructions for deducting RMD, yes, I guess the earlier the better to avoid a mess like the present. Having said all of that...I'm sorry I'm not sure I understood your post and whether my answer made sense?

As to tracking more than 1 RMD, why not combine them & take from 1 account? KISS (keep it simple s.)

This is a super great question, I too prefer simplicity above all, but in this case it's a matter of interest: if I merge them the interest will be reduced drastically...

 

[iloveyoga]

Hi iloveyoga, not too sure what you mean...but thank you for trying to help. I give my 1099s to the tax preparer, but this time I'll also ask her to include a few clarifying documents.

How do you track one's RMDs more than what I've been doing - instructing the institution how I expect to have done this particular transaction AND make sure deduction is made BEFORE END OF YEAR IN QUESTION? I'm changing the institution so I don't expect anymore problems, but please do tell me of a better way? Thanks a lot!

Thanks, my main point was I don't think you need to worry about the 50% penalty, I have not seen that assessed. I assume it would be if someone was trying to circumvent the IRS rules. Hopefully you don't have this problem in the future with your new institution.

 

[Rosedala]

didn't you say the 2016 RMD was withdrawn just slightly late in early Jan 2017?

Oh yes.....Thank you for reminding me! I did say I'm confused and entangled! lol! So, I can say I took the RMD early January 2017 to make up for 2016, and that I'm taking another in 2017 for 2017, right?

And I definitely have proof of this. Thank you again!!!

 

[ERD50]

As to tracking more than 1 RMD, why not combine them & take from 1 account? KISS (keep it simple s.)

This is a super great question, I too prefer simplicity above all, but in this case it's a matter of interest: if I merge them the interest will be reduced drastically...

I think it was meant to combine the RMD, not combine the accounts (unless that also makes sense).

IOW, you can have any number of accounts, your RMD is based on their total EOY value. But one RMD for the total from one of them can satisfy all of them (or any combo that equals the total RMD).

-ERD50

 

[Rosedala]

Thanks, my main point was I don't think you need to worry about the 50% penalty, I have not seen that assessed. I assume it would be if someone was trying to circumvent the IRS rules. Hopefully you don't have this problem in the future with your new institution.

Yes it makes sense, I guess they must have some intuition into who tries to circumvent their rules and who is just an idiot like me lol! Did you say you worked for the IRS? Just curious.

Thanks, some years back I had my IRAs at Penfed and every RMD went smooth and in order for years. So without having to merge these I'm starting today making these w/l at Penfed.

 

[Rosedala]

I think it was meant to combine the RMD, not combine the accounts (unless that also makes sense).

IOW, you can have any number of accounts, your RMD is based on their total EOY value. But one RMD for the total from one of them can satisfy all of them (or any combo that equals the total RMD).

-ERD50

Hi, I do combine the 2 RMDs (my total IRAS), but not the accounts as I'd lose on interest rates.

 

[Rosedala]

Is there some time limit that institutions require for RMDs for a given year?

Not sure but I believe you can withdraw the RMD at any month of the year in question.

 

[Rosedala]

Use form 5329 to request a waiver of the penalty. Include a short note explaining that there was an administrative error and it has been corrected and future RMDs will be made on time. I have done this for clients several times and the waiver has always been granted.

Oh thank you so much! I'm making a note of this too. What type of work do you offer your clients?

 

[jebmke]

Oh thank you so much! I'm making a note of this too. What type of work do you offer your clients?

I do free tax preparation (and help manage 10 sites) with the AARP/TaxAide program. It is a volunteer organization.

 

[gayl]

Thanks ERD50. I'm all for simplicity but the beneficiary ratios are too complicated to combine. Relieved that I can at least combined the RMD amounts. I'll be doing it in 5 years so gleaning information here

Rosedala, I'm not selling any yet but do have to enter the withdrawals so maybe not really automated. But your OP is a perfect example of why I want to be in the driver's seat

 

[Rosedala]

I do free tax preparation (and help manage 10 sites) with the AARP/TaxAide program. It is a volunteer organization.

Oh I have mine done also by agents of AARP at a senior center in NYC. I find them much more efficient than professionals and so you must be too. They are very careful and check one another's tax returns. I was (am) very impressed and feel secure.

 

[Rosedala]

Unless it creates some other hardship, you might want to consider your instructions to the institution to make the RMD in November, to give yourself a month or two to follow it up, and to give the institution more time to fix what they mess up.

This is good advice, but since I'm withdrawing the 2017 RMD from another (more normal) institution, I don't expect to have any problem. I figure I don't have to explain anything to this (normal) institution, right? Just requesting them to send me the check as soon as possible and I'll follow it up as closely as I can to get it soon. I'm making the calculations now and will send my request tomorrow morning. Am I correct?

Actually the institution that did this error can't do anything until I'm done with taxes, etc. they told me.

 

[ivinsfan]

Hello and thank you. I sent it on October 14, 2016, by regular USPS mail which receipt by them I verified by telephone (more than once being they did this and other errors in the past too). I think 3 months is more than ample to make such a simple communication, no?
Well, my letter was SO absolutely explicit yet of only approximately 3 paragraphs of 3 lines or so each, a 6 year old would definitely understand it! lol! I can't help to think the person who handled this is either on some drugs, or mentally retarded or just plain stupid, OR some disgruntled employee who deliberately thought this was punishing his/her boss? Who knows...

I too prefer electronic communication - it's easier and faster - but most corporations prefer the phone or snail mail. In fact I searched the net for emails for various corporations especially for the TIAA's CEO and couldn't find any. Occasionally you find some but...they aren't genuine. Yes, I know: "secure emails", but it's a whole project with passwords (which lately, of course, have to be much more undecipherable (really?)), security questions, etc. etc. etc. I just need time to condition my mind to all of these projects, so soon I'll have to surrender and just do it! lol!

Thanks again for helping.

It odd you've had this happen more than once...it's not really correct that most corporations prefer snail mail or phone....so when these things happen you'll probably get a better faster outcome when you don't throw around words like gross negligence, and mentally retarded or just plain stupid. How would some employee deliberately messing up your account harm their boss?

 

[Travelfreek]

This is why we take RMDs in January of each year! Since my mother in law didn't maximize taking RMDs while in a ridiculously low tax bracket, my husband inherited her IRA and it was then taxable to him at his much higher tax bracket 25% marginal vs. her 0% (she made less than $14k a year total, most of which was SSA). Think about that aspect as you take your RMDs (take larger distributions if it doesn't affect your tax bracket even if you keep the money for yourself).

 

[HadEnuff]

This is good advice, but since I'm withdrawing the 2017 RMD from another (more normal) institution, I don't expect to have any problem. I figure I don't have to explain anything to this (normal) institution, right? Just requesting them to send me the check as soon as possible and I'll follow it up as closely as I can to get it soon. I'm making the calculations now and will send my request tomorrow morning. Am I correct?

Actually the institution that did this error can't do anything until I'm done with taxes, etc. they told me.

I wonder why they can't do anything until you are done with your taxes. What does your taxes being done have to do with them? And what are they saying they will do, once your taxes are done?

 

[Rosedala]

This is why we take RMDs in January of each year! Since my mother in law didn't maximize taking RMDs while in a ridiculously low tax bracket, my husband inherited her IRA and it was then taxable to him. Think about that aspect as you take your RMDs (take larger distributions if it doesn't affect your tax bracket).

Good advice!

 

[Clone]

I missed withdrawing an RMD from a BDA account a couple years back. I actually forgot about it, and put the order in during December, but Fido was all closed up till after the 1st, and the RMD processed a few days later. Learned the lesson to make a checklist of this stuff and pull that RMD earlier in the year.

I use Turbotax, and if I remember correctly, I answered 'No I did not pull an RMD'. There was a comment space where I stated that I had submitted a request, but it did not happen until early January. It did not calculate a penalty, and I never heard anything after. The following year I did pull an additional RMD, and so the form listed a double withdrawal. So the intent and actions were correct.

I also have TIAA accounts from my second career (in process still). If TIAA is that much of a pain, then I will move those funds over to Fido after I no longer pull a paycheck from the university. Pulling RMDs from Fido is easy peasey.

 

[kaneohe]

Oh yes.....Thank you for reminding me! I did say I'm confused and entangled! lol! So, I can say I took the RMD early January 2017 to make up for 2016, and that I'm taking another in 2017 for 2017, right?

And I definitely have proof of this. Thank you again!!!

No, I think you say you requested the RMD in Oct.1016 but the request was not processed until early January 2017.

 

[Rosedala]

I wonder why they can't do anything until you are done with your taxes. What does your taxes being done have to do with them? And what are they saying they will do, once your taxes are done?

Because they want to see with their own eyes whether I'll pay any extra tax that I would ask them to refund to me. They request tons of documentation: 2016 and 2017 "actual" tax returns, "hypothetical return, referred to as a pro forma return for 2016 and 2017 illustrating what the tax burden would've been if the 2017 payment had been made in 2016", etc. If this isn't abuse of privacy I don't know what is. And even though it's entirely their fault, they act as if I were the delinquent!!! You should see the tone of this letter to me.

Well....you asked and I told you...

 

[Rosedala]

I missed withdrawing an RMD from a BDA account a couple years back. I actually forgot about it, and put the order in during December, but Fido was all closed up till after the 1st, and the RMD processed a few days later. Learned the lesson to make a checklist of this stuff and pull that RMD earlier in the year.

I use Turbotax, and if I remember correctly, I answered 'No I did not pull an RMD'. There was a comment space where I stated that I had submitted a request, but it did not happen until early January. It did not calculate a penalty, and I never heard anything after. The following year I did pull an additional RMD, and so the form listed a double withdrawal. So the intent and actions were correct.

I also have TIAA accounts from my second career (in process still). If TIAA is that much of a pain, then I will move those funds over to Fido after I no longer pull a paycheck from the university. Pulling RMDs from Fido is easy peasey.

Oh Clone thank you for telling me your story and I'm so glad that you were able to fix the problem easily. I can see now I've been worrying without reason. But I too learned my lesson and will in the future do this first thing in the year.

However, please do not undo your TIAA account just because I have problems with them, unless you've actually had a bad experience with them too. You may find them fine, I'm sure not everyone doing business with them have problems.

Well, happy ending for both of us!

 

[Sunset]

Because they want to see with their own eyes whether I'll pay any extra tax that I would ask them to refund to me. They request tons of documentation: 2016 and 2017 "actual" tax returns, "hypothetical return, referred to as a pro forma return for 2016 and 2017 illustrating what the tax burden would've been if the 2017 payment had been made in 2016", etc. If this isn't abuse of privacy I don't know what is. And even though it's entirely their fault, they act as if I were the delinquent!!! You should see the tone of this letter to me.

Well....you asked and I told you...

That has nothing to do with sending you a RMD for the current year.
They are just trying to confuse you and the issue.

The issue is:
IF the irs taxes you with a penalty, you will want TIAA to pay you the penalty to make up for their mistake. You may have to sue them for it in the end.

However IF the irs does not impose a penalty (and you get the late 2016 RMD payment added back to the 2016 tax return), then there is nothing TIAA will owe you as no extra payment/penalty other than normal payment will have been made by you.

You must have noticed your 2016 tax return was low on the income side, and you paid less tax for the year than normal. Since it didn't include the late 2016 RMD payment.

 

[pb4uski]

OP, I think you're making a mountain out of a molehill.

While from what you have wrote while TIAA messed up, you could easily have met your RMD requirement simply by calculating the RMD and doing a withdrawal yourself (assumes that you have online access to the account to do withdrawals).... that way you don't need to send them smail mail requesting an RMD and have them ask for additional information.

Second, if it does become an issue with the IRS, they may waive the penalty with an explanation and the documentation that you have. If they don't then you can raise hell with TIAA to make you whole.

Not sure about TIAA, but we have something set up with Vanguard on my Mom's IRa where they calculate and automatically do her RMD on the day of our choosing (we chose her birthday) so once it is set up it happens like clockwork.

 

[Rosedala]

OP, I think you're making a mountain out of a molehill.

While from what you have wrote while TIAA messed up, you could easily have met your RMD requirement simply by calculating the RMD and doing a withdrawal yourself (assumes that you have online access to the account to do withdrawals).... that way you don't need to send them smail mail requesting an RMD and have them ask for additional information.

Second, if it does become an issue with the IRS, they may waive the penalty with an explanation and the documentation that you have. If they don't then you can raise hell with TIAA to make you whole.

Not sure about TIAA, but we have something set up with Vanguard on my Mom's IRa where they calculate and automatically do her RMD on the day of our choosing (we chose her birthday) so once it is set up it happens like clockwork.

Thank you. I'll look into withdrawing it myself. However, I don't like automation, prefer to do it myself. Thanx again.

 

[Rosedala]

First of all, if you take two withdrawals in 2017, you still only get one 1099. Also, did you ask when exactly the funds were withdrawn? Receiving the check on January 10 doesn't matter - it matters when the funds were deducted from your IRA account. What does your IRA statement show for the date of the withdrawal from the account?

The penalty the IRS levies on RMD failures is discretionary, and probably one of the biggest "wiggle room" areas in the tax law (probably because it involves older citizens that may have issues remembering to do it). My grandmother had an issue one year, and I wrote a letter for her to attach to the tax return that should have had the distribution, explaining the situation. I also attached proof that she took the withdrawal that she SHOULD have taken the previous year, as soon as she discovered the error, in addition to that year's scheduled withdrawal. They ended up not levying any penalty.

It doesn't mean you are home free - but just gather up as much evidence as you can to prove your case. It wouldn't hurt to file that paperwork at your broker, if it isn't too terribly onerous, and include a copy of that in your tax return filing.

It likely isn't worth involving a lawyer or accountant. I would first attempt to just draft a short and sweet letter ot include with your 1040 tax return, explaining the situation. A lawyer or accountant would possibly charge a few thousand just for a simple letter like that. If the IRS rejects your explanation and demands the 50% penalty, THEN it might be worth it to talk to a lawyer.

Hi again, may I ask what kind of broker you mean please? The person who prepares my taxes?:

It wouldn't hurt to file that paperwork at your broker, if it isn't too terribly onerous, and include a copy of that in your tax return filing.

Thank you so much again!