Help with IRS Form 5329

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Topic Author
valleyrock
Posts: 1211
Joined: Sun Aug 12, 2018 7:12 am

Help with IRS Form 5329

Post by valleyrock »

I was late to make an RMD withdrawal (for Tax Year 2022). It did happen, but about a month late. So, it was addressed in a timely fashion, but now there's a bureaucracy to feed.

Form 5329 appears to be the way to address this oversight. But I don't understand which part of the form to use...none of the the Parts/categories seem to apply here, and I don't know how to begin.

This matter should be pretty simple to resolve using the form (while attaching an explanatory letter asking forgiveness, etc.), or maybe there's some other way to handle this...

I could just give everything to my tax preparer/accountant, and pay the freight on that. When we discussed this matter a few months ago, the advice was to wait until 2023 taxes were filed, and handle this late RMD separately, to avoid confusion/mixing metaphors at IRS. That seems prudent.

But if there's a way to do this without paying the accountant, that would be nice. As is often the case, once the relevant information is assembled, taking it from there should be straightforward, if I can get started. But maybe it's too complicated...

Any help/advice with this would be much appreciated.
Alan S.
Posts: 12892
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Help with IRS Form 5329

Post by Alan S. »

valleyrock wrote: Thu Jun 06, 2024 9:11 am I was late to make an RMD withdrawal (for Tax Year 2022). It did happen, but about a month late. So, it was addressed in a timely fashion, but now there's a bureaucracy to feed.

Form 5329 appears to be the way to address this oversight. But I don't understand which part of the form to use...none of the the Parts/categories seem to apply here, and I don't know how to begin.

This matter should be pretty simple to resolve using the form (while attaching an explanatory letter asking forgiveness, etc.), or maybe there's some other way to handle this...

I could just give everything to my tax preparer/accountant, and pay the freight on that. When we discussed this matter a few months ago, the advice was to wait until 2023 taxes were filed, and handle this late RMD separately, to avoid confusion/mixing metaphors at IRS. That seems prudent.

But if there's a way to do this without paying the accountant, that would be nice. As is often the case, once the relevant information is assembled, taking it from there should be straightforward, if I can get started. But maybe it's too complicated...

Any help/advice with this would be much appreciated.
The 5329 Instructions are not intuitive with respect to what goes on each of the 4 lines of the form.

Let's assume that your 2022 RMD was 25,000, but you distributed only 20,000 by the end of 2022 leaving a shortfall of 5000.

1) File a 2022 1040X and attach a 2022 5329 completed as follows.
Line 52 25,000
Line 53 20,000
Line 54 On dotted line "RC 5000" and on the line 0
Line 55 0

2) The 1040X has a box in which you can write a brief explanation of your RC (reasonable cause) and why you are filing the 1040X. Make this brief and indicate the date that the missed RMD was eventually distributed to you.

You probably will not hear further unless the IRS declines the waiver. No reason to go to an accountant for this.
Topic Author
valleyrock
Posts: 1211
Joined: Sun Aug 12, 2018 7:12 am

Re: Help with IRS Form 5329

Post by valleyrock »

Alan S. wrote: Thu Jun 06, 2024 9:31 am
valleyrock wrote: Thu Jun 06, 2024 9:11 am I was late to make an RMD withdrawal (for Tax Year 2022). It did happen, but about a month late. So, it was addressed in a timely fashion, but now there's a bureaucracy to feed.

Form 5329 appears to be the way to address this oversight. But I don't understand which part of the form to use...none of the the Parts/categories seem to apply here, and I don't know how to begin.

This matter should be pretty simple to resolve using the form (while attaching an explanatory letter asking forgiveness, etc.), or maybe there's some other way to handle this...

I could just give everything to my tax preparer/accountant, and pay the freight on that. When we discussed this matter a few months ago, the advice was to wait until 2023 taxes were filed, and handle this late RMD separately, to avoid confusion/mixing metaphors at IRS. That seems prudent.

But if there's a way to do this without paying the accountant, that would be nice. As is often the case, once the relevant information is assembled, taking it from there should be straightforward, if I can get started. But maybe it's too complicated...

Any help/advice with this would be much appreciated.
The 5329 Instructions are not intuitive with respect to what goes on each of the 4 lines of the form.

Let's assume that your 2022 RMD was 25,000, but you distributed only 20,000 by the end of 2022 leaving a shortfall of 5000.

1) File a 2022 1040X and attach a 2022 5329 completed as follows.
Line 52 25,000
Line 53 20,000
Line 54 On dotted line "RC 5000" and on the line 0
Line 55 0

2) The 1040X has a box in which you can write a brief explanation of your RC (reasonable cause) and why you are filing the 1040X. Make this brief and indicate the date that the missed RMD was eventually distributed to you.

You probably will not hear further unless the IRS declines the waiver. No reason to go to an accountant for this.
Many thanks for the specific advice and example. I really appreaciate it. I did distribute the necessary amount, but just did it late.

This was my first distribution at age 72, and only for that first distribution one can wait until April 1 of the following year. (I mistakenly thought I had until tax day.) So, for the year I did that, I made two distributions (one for that very first distribution, and one for that tax year), and those distrubutions were included in income when determining taxes due for that year.

So, it would seem I don't need to do a 1040X. Instead I'll plan to send in a copy of the return for that year, and on Form 5329 put in the same amount on Lines 52 and 53, with it zeroed on Line 55. And I'll add a "Dear IRS" letter, explaining what happened.... I find that a polite, factual letter helps when sending such things in.

Thanks again.
secondcor521
Posts: 1731
Joined: Wed Sep 10, 2014 4:11 pm

Re: Help with IRS Form 5329

Post by secondcor521 »

You should still file an amended return (as Alan S. recommended) instead of a copy of your 1040 plus a "Dear IRS" letter (as you suggest).

You owe the excess accumulation penalty. You "forgot" to file a 5329 to either pay the penalty or request a reasonable cause exception. The proper way to remedy failing to file a form that the IRS required you to file is to file an amended return.

If you want to avoid confusing the IRS as you say, then do things the way they expect you to and instruct you to, not the way that works best for you or even seems like common sense. The IRS is dealing with hundreds of millions of returns each year and they're understaffed. They don't have the bandwidth to deal with individual taxpayer creativity.

A 1040-X is more likely to smoothly resolve your issue than your approach.
Alan S.
Posts: 12892
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Help with IRS Form 5329

Post by Alan S. »

valleyrock wrote: Fri Jun 07, 2024 8:55 am
This was my first distribution at age 72, and only for that first distribution one can wait until April 1 of the following year. (I mistakenly thought I had until tax day.) So, for the year I did that, I made two distributions (one for that very first distribution, and one for that tax year), and those distrubutions were included in income when determining taxes due for that year.

So, it would seem I don't need to do a 1040X. Instead I'll plan to send in a copy of the return for that year, and on Form 5329 put in the same amount on Lines 52 and 53, with it zeroed on Line 55. And I'll add a "Dear IRS" letter, explaining what happened.... I find that a polite, factual letter helps when sending such things in.

Thanks again.
This new info changes my advice. Since the late RMD was for your first RMD year and that 2022 RMD was not delinquent until 4/1/23, you would request the waiver on a 2023 5329 instead of a 2022 5329.

But if you have filed your 2023 return without that 5329, you should complete a 2023 1040X with the correct 2023 5329 per my prior example. Keep your explanatory statement brief and include the date and amount of the made up distribution. Unless you have a better reason, indicate that the reason you were late it that you thought the deadline for your 2022 RMD was 4/15/23 instead of 4/1/23. If you send in the 2023 5329 by itself without a 1040 X, the IRS may return it and request the 1040X even though the 5329 is treated as a separate return.
Topic Author
valleyrock
Posts: 1211
Joined: Sun Aug 12, 2018 7:12 am

Re: Help with IRS Form 5329

Post by valleyrock »

Alan S. wrote: Fri Jun 07, 2024 11:30 am
valleyrock wrote: Fri Jun 07, 2024 8:55 am
This was my first distribution at age 72, and only for that first distribution one can wait until April 1 of the following year. (I mistakenly thought I had until tax day.) So, for the year I did that, I made two distributions (one for that very first distribution, and one for that tax year), and those distrubutions were included in income when determining taxes due for that year.

So, it would seem I don't need to do a 1040X. Instead I'll plan to send in a copy of the return for that year, and on Form 5329 put in the same amount on Lines 52 and 53, with it zeroed on Line 55. And I'll add a "Dear IRS" letter, explaining what happened.... I find that a polite, factual letter helps when sending such things in.

Thanks again.
This new info changes my advice. Since the late RMD was for your first RMD year and that 2022 RMD was not delinquent until 4/1/23, you would request the waiver on a 2023 5329 instead of a 2022 5329.

But if you have filed your 2023 return without that 5329, you should complete a 2023 1040X with the correct 2023 5329 per my prior example. Keep your explanatory statement brief and include the date and amount of the made up distribution. Unless you have a better reason, indicate that the reason you were late it that you thought the deadline for your 2022 RMD was 4/15/23 instead of 4/1/23. If you send in the 2023 5329 by itself without a 1040 X, the IRS may return it and request the 1040X even though the 5329 is treated as a separate return.
Yes, got it. I plan to use a 2023 5329 form, with a brief explanation noting that all income from the late 2022 RMD was included in the 2023 tax filing (along with the 2023 RMDs). I'll add a copy of the 2023 return so they can see the reported RMD income, although it's simply totaled out there. That should keep them happy and get me the waiver

Lesson learned is don't wait until the last minute to get RMDs. Stuff happens to delay it. In my case TIAA required spousal waivers, and the ones they sent to get notarized expired one month after they were sent. So they were rejected by the time I got around to getting them notarized and sent.

So, thanks again. Very helpful.
Alan S.
Posts: 12892
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Help with IRS Form 5329

Post by Alan S. »

Do not send a copy of the 2023 return with your explanatory statement. The statement is sufficient.
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