Institution missed my 2016 RMD!!!

[Rosedala]

Hello, I'm retired though not an "early" retiree, but I hope someone can help me?

My institution missed my 2016 RMD despite my letter giving precise instructions as I did each year. I received the RMD check BUT on Jan. 10 of this year instead of on 2016, so no 1099 for 2016. Should I take another RMD for this year again? And I'll get two 1099s in 2017?

Am I still going to be responsible for the 50% tax? I sent them a complaint letter and they answered for me to send them tons of proofs...

I'm sorry for lengthy post but I'm at a loss as to what to do. Should I ask the IRS or consult a lawyer? An accountant? What should I do?

Thanks ever so much for any help.

 

[MooreBonds]

Hello, I'm retired though not an "early" retiree, but I hope someone can help me?

My institution missed my 2016 RMD despite my letter giving precise instructions as I did each year. I received the RMD check BUT on Jan. 10 of this year instead of on 2016, so no 1099 for 2016. Should I take another RMD for this year again? And I'll get two 1099s in 2017?

Am I still going to be responsible for the 50% tax? I sent them a complaint letter and they answered for me to send them tons of proofs...

I'm sorry for lengthy post but I'm at a loss as to what to do. Should I ask the IRS or consult a lawyer? An accountant? What should I do?

Thanks ever so much for any help.

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 Also, did you ask when exactly the funds were withdrawn?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.

 

[Ronstar]

Welcome Rosedala,

I'm sorry I cannot answer your questions on RMD's, but fellow members should be able to provide sound advice. Please allow some time - it takes a while for others to see and respond to forum posts.

 

[Rosedala]

Thank you Ronstar, I'm sure someone will be able to help.

 

[Rosedala]

Oh thank you so much MooreBonds for your good explanations and suggestions which I will follow.

I thought I'd get one 1099 for the deduction done this year instead of the last, and one for the deduction of this year 2017. But you say I don't have to deduct for this year? It will be a relief for me, lol.

Yes, you're right that only the date the funds were deducted is valid, and on the IRA statement it said: "Effective Date: January 9, 2017" and "Processing & Check Date: January 10, 2017".

It's a very sensible advice you gave me to write an explanation to the IRS when I do the tax return and then if I still have to pay the fine, I'll have to do something against TIAA, since this is the 2nd time they did this about 5 years ago plus a number of other errors. I'm writing a letter to the CEO and, as you well say, I'm sending copies of everything to the IRS.

(probably because it involves older citizens that may have issues remembering to do it).

LOL...that's right and I'm one of them, though in this particular case it was the institution's incompetent staff. How lucky for your grandmother to have such a kind grandson!

You are right again that fees for a lawyer or accountant would defeat my purpose. I just was furious and wanted to "punish" them, but I feel more at ease now.

Again, I'm most grateful for your very helpful advice!

 

[Bryan Barnfellow]

Ah, TIAA...I am a fellow client and have watched in dismay the sad deterioration in their customer service and overall efficiency over recent decades. They used to be different.
If the IRS assesses a penalty, I would definitely pursue a reimbursement from TIAA.

Note: the New York Times recently ran a negative story on TIAA's behavior. In your letter you might reference that story and say that absent a timely reimbursement your next letter will copy the Times' financial desk.

-BB

 

[Newventurer]

Oh thank you so much MooreBonds for your good explanations and suggestions which I will follow.

But you say I don't have to deduct for this year? It will be a relief for me, lol.

Be careful, I could be wrong but not sure this is what MooreBonds said, I’ll let MooreBonds correct if necessary.

Good luck!

 

[audreyh1]

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

 

[HadEnuff]

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.

 

[Rosedala]

Oh thank you so much MooreBonds for your good explanations and suggestions which I will follow.

But you say I don't have to deduct for this year? It will be a relief for me, lol.

Be careful, I could be wrong but not sure this is what MooreBonds said, I’ll let MooreBonds correct if necessary.

Good luck!

Hi Newventurer and thanks a lot for alerting me, but I'm sure MooreBonds will let me know if I misinterpreted his statement. Besides, I was thinking of asking the IRS just to make sure. Thanks again!

 

[ERD50]

...

My institution missed my 2016 RMD despite my letter giving precise instructions as I did each year. I received the RMD check BUT on Jan. 10 of this year instead of on 2016, so no 1099 for 2016. Should I take another RMD for this year again? ...

On what date did you send this letter? Did you keep a copy? Was it regular USPS mail? If so, how can you know if/when it was received?

What did you do to verify the RMD was withdrawn before year's end?

I prefer electronic communication for all this, you can generally go online, and verify the transaction the next day if not immediately. But if I had to use postal mail, I'd be allowing plenty of time to verify and correct it if there were any glitches.

-ERD50

 

[jebmke]

Hello, I'm retired though not an "early" retiree, but I hope someone can help me?

My institution missed my 2016 RMD despite my letter giving precise instructions as I did each year. I received the RMD check BUT on Jan. 10 of this year instead of on 2016, so no 1099 for 2016. Should I take another RMD for this year again? And I'll get two 1099s in 2017?

Am I still going to be responsible for the 50% tax? I sent them a complaint letter and they answered for me to send them tons of proofs...

I'm sorry for lengthy post but I'm at a loss as to what to do. Should I ask the IRS or consult a lawyer? An accountant? What should I do?

Thanks ever so much for any help.

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.

 

[HadEnuff]

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.

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.

 

[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.

Oh HadEnough (and me too, of the convoluted IRA!) lol! Thanks for bringing up these 2 good points which I was afraid to include here as even myself got so entangled and confused...

I was stupid to never printing my snail mails and 3 months ago I was wiped out by some virus (learned my lesson!). I had forgotten all about the IRA until now which is "the" time, so in gathering whatever paper files I have to see what's what...I found this TIAA's person's UNSIGNED full page letter to me mentioning my letter of instructions:

On October 14, 2016 where you started the process of requesting a distribution of your IRA for the purposes of satisfying your 2016 RMD..."

So at least they won't be able to deny my letter as I can't produce it anymore. Notice the merry-go-round instead of: "On __ you requested your 2016 RMD", definitely showing reluctance to acknowledge their fault! Then he goes on and on listing all the things I must do and show him so they may refund any moneys. You're SO right they've been seriously deteriorating all along, what a pity being they are, supposedly, teachers!!!

The 2nd point is more sticky as I don't know whether to diminish the 2016 balance by the distribution already received, before I do the 2017 RMD...IF I find out that I must do it.

This gross negligence happened also in 2012/13 and I can't remember what I did, but I have a letter from the then manager whose reaction was normal and pleasant to my just one-time complaint. She did some calculations based on my tax return (which I didn't quite understand) and refunded to me $1800...That lady isn't working there anymore... lol!

Thank you so very much for helping bring up the missing pieces to see how or whether they can be glued together.

 

[Big_Hitter]

I'm sorry for lengthy post but I'm at a loss as to what to do. Should I ask the IRS or consult a lawyer? An accountant? What should I do?

Thanks ever so much for any help.

consult with a good cpa

 

[Rosedala]

consult with a good cpa

Yes, I will consider that. Thank you!

 

[Sunset]

OP - as I understand it, the late RMD you got was for the previous year 2016. So you do need to take out an RMD this year for 2017.
You don't get to skip a year just because one was late, especially as you are arguing the late one should have come out in 2016.

I would write in your letter to the IRS state how you want to amend your 2016 return to include the late RMD. As that will need to be done anyhow.

You can ask the IRS what number to use for 2017 RMD, but failing that what I would do is use the number that I would have IF the late RMD had come out at the end of 2016.

You should also change when you get RMD's from this company to earlier in the year so you have time to fix this issue, otherwise someday the friendly IRS may not help you and instead impose the 50% penalty (plus you still have to take out the RMD).

 

[kaneohe]

Hi Newventurer and thanks a lot for alerting me, but I'm sure MooreBonds will let me know if I misinterpreted his statement. Besides, I was thinking of asking the IRS just to make sure. Thanks again!

MooreBonds gave you good advice.........and MB did NOT say you should not take the RMD for 2017. MB said that if you took another RMD this yr, you would only get one 1099 combining both withdrawals. The Jan w/d was really for 2016 and the other later one (if you do it) will be for 2017. If you don't take another for 2017, you will have missed an RMD totally , whether you want to think of it as missing 2016 or 2017 is up to you. I am sure IRS will not be happy.

Others have also given you good advice that you should fess up to IRS , show that you made the w/d as soon as you found out (early Jan is pretty good) and ask for forgiveness (the waiver of penalty). If you don't take another w/d for 2017, then your story won't fly as well.

 

[Rosedala]

On what date did you send this letter? Did you keep a copy? Was it regular USPS mail? If so, how can you know if/when it was received?

What did you do to verify the RMD was withdrawn before year's end?

I prefer electronic communication for all this, you can generally go online, and verify the transaction the next day if not immediately. But if I had to use postal mail, I'd be allowing plenty of time to verify and correct it if there were any glitches.

-ERD50

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?

What did you do to verify the RMD was withdrawn before year's end?

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.

 

[kaneohe]

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.

 

[Rosedala]

MooreBonds gave you good advice.........and MB did NOT say you should not take the RMD for 2017. MB said that if you took another RMD this yr, you would only get one 1099 combining both withdrawals. The Jan w/d was really for 2016 and the other later one (if you do it) will be for 2017. If you don't take another for 2017, you will have missed an RMD totally , whether you want to think of it as missing 2016 or 2017 is up to you. I am sure IRS will not be happy.

Others have also given you good advice that you should fess up to IRS , show that you made the w/d as soon as you found out (early Jan is pretty good) and ask for forgiveness (the waiver of penalty). If you don't take another w/d for 2017, then your story won't fly as well.

THANK YOU SO MUCH kaneohe, and yes, I'm so in awe of, and gratitude to, all the knowledgeable and kind souls who are helping me so well here!

It seems I did misinterpret MooreBands' excellent advice (thank you MB!!!). I'm off NOW to prepare this year's RMD to make sure not to exacerbate the boss: IRS, and yes I'll send a "fess up" and proof that I requested it properly (wish I could enter TIAA's office and steal my letter!).

show that you made the w/d as soon as you found out (early Jan is pretty good)

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! Since this mess happened, I just got it off my mind - other life's problems, dilemmas, family illnesses, etc. (maybe subconscious runaway from this mess?). My IRAs are split with Penfed which is a good and responsible CU, so there will be no problem this time.

Again thanks a lot to you and to all the other members in this thread!

 

[iloveyoga]

I worked in the business and this happened rarely. I have never heard of the IRS assessing the penalty. I would just claim it according to the 1099 they issue. I would also track your own RMDs in the future.

 

[Rosedala]

I worked in the business and this happened rarely. I have never heard of the IRS assessing the penalty. I would just claim it according to the 1099 they issue. I would also track your own RMDs in the future.

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!

 

[gayl]

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.)

 

[Rosedala]

Ah, TIAA...I am a fellow client and have watched in dismay the sad deterioration in their customer service and overall efficiency over recent decades. They used to be different.
If the IRS assesses a penalty, I would definitely pursue a reimbursement from TIAA.

Note: the New York Times recently ran a negative story on TIAA's behavior. In your letter you might reference that story and say that absent a timely reimbursement your next letter will copy the Times' financial desk.

-BB

Hello and thank you Bryan! So you are also TIAA's client, well you must be smarter than I to avoid a mess like mine... lol! You're right some years back I never had problems of any nature with them. With me it started around 2011 or so.

LOL! I'll be sure to threaten TIAA with giving my story to the NYTimes if they continue to give me a hard time. lol!

Thanks so much again!