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Getting Out of an RMD Penalty


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See Also: 10 RMD Mistakes to Avoid

[ANSWER]You can ask the IRS to waive the penalty. First, calculate the amount you should have withdrawn as your RMD for each of those years and withdraw the money right away. Then file a separate Form 5329 with the IRS immediately for each year's RMD you missed. Complete lines 52 and 53 with the amount you should have withdrawn, then write RC, which means "reasonable cause," and the amount of the penalty you want waived in parentheses on the dotted line next to line 54. Add a brief note saying that the RMD was omitted by the brokerage and was withdrawn immediately upon discovery, says Ed Slott, publisher of IRAHelp.com . (See instructions for IRS.gov's Form 5329 .)

You don't need to send any penalty money unless you hear back from the IRS denying your request for a waiver. Slott says he's never seen a penalty not waived for someone who withdrew the money as soon as he or she realized the mistake and filed Form 5329 with a reasonable excuse.

See Also: Calculate Your Required Minimum Distribution From IRAs

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Personal Finance , Retirement



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