Institution missed my 2016 RMD!!!

[ivinsfan]

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

Just a few posts ago you said you prefer electronic communications...so I am starting to wonder about , what is you going on here. You've turned a fairly simple question into a marathon...why don't you head over to the Hi I am thread and introduce yourself.

 

[Rosedala]

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.

About your last paragraph, yes, I noticed and was wondering how to fix it. So assuming I won't be penalized, I'll follow your advice by putting my (wrong) 2017 RMD back into my 2016 tax return, then make another (right) RMD withdrawal today, 2017. Am I correct?

 

[Rosedala]

Do you have a copy of your instructions to the institution?

Another thing to remember is that since your account was not diminished by the RMD in 2016, your year-end balance still included that amount. That undiminished amount will be the basis for your 2017 RMD, very likely. Even if you successfully argue that you shouldn't be penalized for the late RMD, you should make sure you know what the basis will be for 2017.

That undiminished amount will be the basis for your 2017 RMD, very likely. Even if you successfully argue that you shouldn't be penalized for the late RMD, you should make sure you know what the basis will be for 2017.

Hi again, I'm re-reading the excellent advice and intend to give my wrongly taken 2017 RMD to my 2016 tax return and this will even up the basis, right?

And of course I'm taking now a 2017 RMD for 2017. However, since I won't be doing my taxes until January...I'd be using the UNdiminished basis for the 2017 RMD no? I'm sorry to still have these questions but I got quite dizzy with the many mix-ups my institution created....

 

[Sunset]

About your last paragraph, yes, I noticed and was wondering how to fix it. So assuming I won't be penalized, I'll follow your advice by putting my (wrong) 2017 RMD back into my 2016 tax return, then make another (right) RMD withdrawal today, 2017. Am I correct?

You can include the late 2016 RMD amendment to your 2016 tax return along with the letter you are going to write detailing to the irs exactly how this happened (you requested 2016 RMD in 2016 but the RMD was performed late see the proof) and that this amendment is to correct the 2016 tax return.
Also remember to include a check for the more taxes due

 

[Rosedala]

You can include the late 2016 RMD amendment to your 2016 tax return along with the letter you are going to write detailing to the irs exactly how this happened (you requested 2016 RMD in 2016 but the RMD was performed late see the proof) and that this amendment is to correct the 2016 tax return.
Also remember to include a check for the more taxes due

Oh how much I appreciate it Sunset that you made it easier for me to understand, but one last question: if I request the 2017 RMD now before the tax return, then my IRA balance is larger since I didn't withdraw from 2016? Also, if I put the RMD check I got, back to the tax return, the balance will be even larger? Please forgive my dumbness...
Love your little cool man! ;-)

 

[Rosedala]

Do you have a copy of your instructions to the institution?

Another thing to remember is that since your account was not diminished by the RMD in 2016, your year-end balance still included that amount. That undiminished amount will be the basis for your 2017 RMD, very likely. Even if you successfully argue that you shouldn't be penalized for the late RMD, you should make sure you know what the basis will be for 2017.

Hi HadEnuff, I'm sorry my poor mind takes so long to understand, but thanks to you and all the other people's precious help here I'm clear on what I have to do and in January I'll have my tax preparer return to Uncle Sam my RMD taken wrongly and will include Form 5329, and all proof...

But...what will happen when I take this year's (2017) RMD with my year-end balance UNdiminished by the 2016 RMD which never took place?. Will this bring consequences? If so how to do it correctly?

 

[Sunset]

OP -
RMD stands for Required Minimum Distribution , so to be really safe (and it hardly makes any difference) use the value of your 401K/IRA at whatever value it was on December 31 2016.
This will ensure you are taking out at least the correct amount for the year 2017.
Yes the amount taken out will be higher than it would be if the 2016 RMD had happened at the correct time, but the extra amount will in fact be small, and only for this year.
Succeeding years will be correct.

As an example since I don't know your exact numbers, I used IRA total of $1 Million and age 77 so the RMD would normally be $47,169.81 But since the 2016 amount was not taken out early enough using the Dec 31 2016 number with it added back in, the RMD will be $49,394.81. An extra amount of $2,225

So you can see the "extra amount" needed to be taken out this one year to be safe is only 0.22 % of the total IRA amount, and it's not wasted as you will probably need some extra cash to pay your 2016 tax bill once you add back in the 2016 RMD that should have been claimed as received in the 2016 tax return.

 

[Rosedala]

OP -
RMD stands for Required Minimum Distribution , so to be really safe (and it hardly makes any difference) use the value of your 401K/IRA at whatever value it was on December 31 2016.
This will ensure you are taking out at least the correct amount for the year 2017.
Yes the amount taken out will be higher than it would be if the 2016 RMD had happened at the correct time, but the extra amount will in fact be small, and only for this year.
Succeeding years will be correct.

As an example since I don't know your exact numbers, I used IRA total of $1 Million and age 77 so the RMD would normally be $47,169.81 But since the 2016 amount was not taken out early enough using the Dec 31 2016 number with it added back in, the RMD will be $49,394.81. An extra amount of $2,225

So you can see the "extra amount" needed to be taken out this one year to be safe is only 0.22 % of the total IRA amount, and it's not wasted as you will probably need some extra cash to pay your 2016 tax bill once you add back in the 2016 RMD that should have been claimed as received in the 2016 tax return.

Oh thank you so much! I understand, it can't hurt my taking out more and that's ok, I just wanted to make sure I'm doing the right thing.
LOL! I have no secret with my numbers but you've demonstrated very clearly how it works.
Thank you again and again....

 

[MooreBonds]

Originally Posted by MooreBonds View Post
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?:

Thank you so much again!

In your original post, you mentioned your broker wanted you to fill out a bunch of paperwork for your claim, and you didn't know if it would be worth it. That is the paperwork I was referring to.

You can include the late 2016 RMD amendment to your 2016 tax return along with the letter you are going to write detailing to the irs exactly how this happened (you requested 2016 RMD in 2016 but the RMD was performed late see the proof) and that this amendment is to correct the 2016 tax return.
Also remember to include a check for the more taxes due

Obviously, the OP is free to do what they wish...but if it were my grandmother (or my) taxes, I would simply include the notes and documentation on my 2017 taxes, and leave my 2016 taxes alone, since it would involve the IRS getting a 1099 showing you withdrew $x in 2017, and having to digest a letter saying "I took my 2016 withdrawl in 2017, plus my 2017 RMD, but I'm only paying taxes on the 2017 withdrawal part". Plus their tax preparer doing it correctly, with the chance this gets all mixed in up 2017 (because if the OP amends their 2016 taxes by paying taxes on monies withdrawn in 2017, the OP would have to reduce their taxable income in 2017 by the amount they claimed in 2016).

 

[Rosedala]

Especially since you have burned before, it might be useful to prevent these problems instead of cleaning up the mess. Sending the request and verifying receipt was a good first step Verifying that it actually got done in a timely manner...........that would have been useful too......esp. if you are staying at the same imperfect institution. You can blame them but you are the one who has to deal w/ the consequences.

I couldn't agree more, kaneohe, thank you! As I mentioned somewhere here, starting now I'm taking the RMDs at my other IRA institution (I split the balance) with which in the past I never had problems. I continue with TIAA as I couldn't get their interest rate anywhere else, but it'll be ok if I don't "rock the boat" and leave it alone like a dormant princess. I'm learning in my ripe old age to take prevention more seriously so I'll do the RMDs first thing in those years, by faxing the requests to the institution.

 

[iloveyoga]

In your original post, you mentioned your broker wanted you to fill out a bunch of paperwork for your claim, and you didn't know if it would be worth it. That is the paperwork I was referring to.



Obviously, the OP is free to do what they wish...but if it were my grandmother (or my) taxes, I would simply include the notes and documentation on my 2017 taxes, and leave my 2016 taxes alone, since it would involve the IRS getting a 1099 showing you withdrew $x in 2017, and having to digest a letter saying "I took my 2016 withdrawl in 2017, plus my 2017 RMD, but I'm only paying taxes on the 2017 withdrawal part". Plus their tax preparer doing it correctly, with the chance this gets all mixed in up 2017 (because if the OP amends their 2016 taxes by paying taxes on monies withdrawn in 2017, the OP would have to reduce their taxable income in 2017 by the amount they claimed in 2016).

+1 You said it much better than I would. Why make it so complicated?

 

[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 ERD50, just clarifying that I do add up ALL my IRAS before dividing into the IRS-dictated percentage...
BTW...do you happen to know what these stand for: OP - IOW - EOY - Thank you!

 

[Rosedala]

+1 You said it much better than I would. Why make it so complicated?

Hi iloveyoga, I can't tell who wrote the lower part of your post which I'm copying below as the Quote didn't catch it. I'm sorry but I find it difficult to decipher it.

Since you seem to understand it well ("You said it much better than I would.") won't you kindly explain it to me as to a dummy? Thanks so much. Here it is:

Obviously, the OP is free to do what they wish...but if it were my grandmother (or my) taxes, I would simply include the notes and documentation on my 2017 taxes, and leave my 2016 taxes alone, since it would involve the IRS getting a 1099 showing you withdrew $x in 2017, and having to digest a letter saying "I took my 2016 withdrawl in 2017, plus my 2017 RMD, but I'm only paying taxes on the 2017 withdrawal part". Plus their tax preparer doing it correctly, with the chance this gets all mixed in up 2017 (because if the OP amends their 2016 taxes by paying taxes on monies withdrawn in 2017, the OP would have to reduce their taxable income in 2017 by the amount they claimed in 2016).

 

[ivinsfan]

Just my opinion but I think you kind well meaning posters are being played..

 

[audreyh1]

It seems quite strange.......

Certainly a "Hi I am" post would be nice to start.

 

[ERD50]

Just my opinion but I think you kind well meaning posters are being played..

Sure is feeling that way. -ERD50

 

[Rosedala]

Just my opinion but I think you kind well meaning posters are being played..

Forgive me....I do not understand your messages.

 

[Sunset]

Just my opinion but I think you kind well meaning posters are being played..

I was thinking the same thing, but figured I'd give it one more shot in case I was wrong, and someone reading later might need the info/opinion.

 

[RunningBum]

Forgive me....I do not understand your messages.

Would you like someone to explain it to you as if you were a dummy?

 

[Rosedala]

Would you like someone to explain it to you as if you were a dummy?

Thanx...not interested.

 

[Rosedala]

I was thinking the same thing, but figured I'd give it one more shot in case I was wrong, and someone reading later might need the info/opinion.

Hi Sunset, what info/opinion? Thanks.

 

[Rosedala]

THANK YOU ALL SO MUCH FOR YOUR KIND AND EFFICIENT HELP!!! It may interest you to know that yesterday I've faxed a special letter of complaint to TIAA's CEO and President. At the same time I faxed my request for the 2017 RMD to Penfed. The latter acknowledged my request immediately, this CU is super great! I was able to do this thanks to all your good advice.

I'll fix the rest of the problem in the January tax return. So everything's in order and hopefully it will work. Thanks to all of you!

Only one problem left....while I mentioned to the CEO the date of my letter of instructions (also mentioned by a TIAA person), the CEO will ask me to send a copy, which I didn't print before I lost my computer data.

My question: If I confess to them I no longer have it, do you think they may deny receiving it, despite the fact that the TIAA person's letter does mention it?

So sorry it took so long for me to straighten this out in my mind, and THANK YOU AGAIN TO EVERYONE WHO HELPED ME SO MUCH!!!

 

[pb4uski]

Respond to the CEO that you didn't keep a printed copy and your electrinic copy is not recoverable because of a disk crash but that you are certain that it was received because you later received a letter from TIAA acknowledging receipt and following up on it.

 

[RunningBum]

Forge a copy of the letter. You're good at making things up, aren't you?

(Snarky response to a suspected troll, but a foolproof solution nonetheless. They can only prove you wrong if they have a record of the letter, in which case you are fine. Otherwise they have to take the copy as genuine.)

 

[ivinsfan]

Forge a copy of the letter. You're good at making things up, aren't you?

(Snarky response to a suspected troll, but a foolproof solution nonetheless. They can only prove you wrong if they have a record of the letter, in which case you are fine. Otherwise they have to take the copy as genuine.)

winner,winner, chicken dinner!!!!