Missed RMD from IRA

[Texas Proud]

OK.... I need some help on this... but trying to do my own research...

I was doing my mother's tax return... and noticed that she did not have anything from Vanguard on her IRA distribution...

SO, a call to her and we find out IT WAS NOT MADE..... she thought she had it set up for automatic, but they say otherwise...

Today we have moved about $7700...

My questions....

Do we report it on the 2007 tax return and pay the penalty now or the 2008 tax return and pay next year?

It appears that we MIGHT get relief from the penalty (it says you have to pay and request it back).... does anyone know if they are strict on this or are reasonable?

Anything else I should know?


Thanks...

 

[ziggy29]

This isn't her first RMD, is it? That is, she didn't turn 70 1/2 in 2007, did she?

 

[Texas Proud]

This isn't her first RMD, is it? That is, she didn't turn 70 1/2 in 2007, did she?

Nope.. she is 88...

I think I will use her age in the request that it be waived...

 

[Texas Proud]

Anybody

 

[retire@40]

Just have her take out a lump sum right now for all the RMD she missed through 12/31/2007, plus the amount for 2008 if you want to get that out of the way now too.

Don't worry about paying a penalty. The investment company will give your mother a 1099-R next year with code 7 in box 7 just like any normal distribution, so you just report the income without a penalty.

Chances are the IRS won't catch it, and even if they do, they would probably waive the penalty if you could show reasonable cause and you made a good faith effort in doing the catchup RMDs on your own.

IOW, don't make a bigger issue out of it than you need to.

 

[FinanceDude]

According to my buddy at the IS (high school friend) the IRS doesn't pursue such cases very heavily, as long as you have taken action to remedy the problem. In his words: "Making life hard for folks over 65 isn't good for what little respect we have from the general public anyway"..............

 

[Texas Proud]

Thanks guys.... we have taken the money out within two days of finding out we did not... and we are making sure the automatic withdrawal is set up...

Since we do not have a 1099 for last year... we will put it in the 2008 return..

If they come and get us... well, my mom is ready to pay for the mistake...