Look at form 5329. You can fill it out and file it as a standalone return. There is no reason to amend prior tax returns.House Blend wrote:But Form 5329 is for reporting underpayment of 2010 RMDs. So, I suppose she needs to file an amended return for each of the tax years 2003-2008? (We can skip 2009 because of the RMD moratorium.) But even so, how is one supposed to determine the correct amount? Example: if she had taken an RMD in 2003, what would her 2004 RMD have been?
House Blend wrote:But Form 5329 is for reporting underpayment of 2010 RMDs. So, I suppose she needs to file an amended return for each of the tax years 2003-2008? (We can skip 2009 because of the RMD moratorium.) But even so, how is one supposed to determine the correct amount? Example: if she had taken an RMD in 2003, what would her 2004 RMD have been?
This assumes the IRS and insurer are responsive to the apparent needs of taxayers/account holders...they typically aren't.House Blend wrote:Something about this still smells funny to me, because the insurance company has to report these account balances every year to the IRS, so the IRS could presumably see that she hadn't taken the correct RMD for many years running. Doesn't seem like it could go on this long without the IRS taking notice.
House Blend wrote:My inclination is to contact the IRS before proceeding further. We certainly want to fix the problem, but want to maximize her chances of not having to pay penalties.
Any advice? Any guesses on how the IRS will handle this?
MarkNYC wrote:Although the regulations don't require it, the IRS wants you to pay the penalty first via Form 5329 and then request an abatement and refund. Having rectified the untaken distributions ASAP, I'd be inclined to not offer-up the penalty and hope the penalty issue never comes up. If it does, I'd explain the relevant circumstances and document the remedial steps taken that should be sufficient for waiver of the penalty.
Waiver of tax. The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows.
1. Complete lines 50 and 51 as instructed.
2. Enter "RC" and the amount you want waived in parentheses on the dotted line next to line 52. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line 52.
3. Complete line 53 as instructed. You must pay any tax due that is reported on line 53.
The IRS will review the information you provide and decide whether to grant your request for a waiver.
freckles01 wrote: I am going thru a similar situation with my dad's RMD mess and would like to know if you have an update to share? Did the IRS ever contact or formally waive penalties
flowerbuyer wrote:My mom, who had been recently diagnosed with Alzheimer's, forgot to mail her income tax return which had been prepared by her accountant, but did mail her quarterly paymentss in one lump sum, but not the payment of her taxes owing. When she gave me the letter from the IRS about failure to pay her taxes, I called her accountant. He had me mail the return, snd advised me to ask for a waiver of the penalty..
So, I mailed a letter to the IRS, explaining the circumstances and my mother's disease, and requested that the penalty be waived.
The IRS waived the penalty. So they can be reasonable, after all.
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