You’d think that you’d remember to take your required minimum distribution (RMD). But, too often many people do, especially if you’re working past retirement age and don’t need those funds to live on. If you forgot to take an RMD, if you catch it before you file your taxes—you might get a pass from the IRS.
Ok, we all know we must take RMDs once we turn 70 ½ years of age, whether we need that money or not. There’s no set date in place during the year for you to make the withdrawal, as long as you do it by the end of the calendar year.
Some people forget to take these distributions because they don’t need that money. Others may have an IRA and a 401(k) and forget to withdraw from one or the other. But the IRS won’t forget you should have taken that RMD. And they certainly won’t forget to impose a 50 percent excise tax on the amount you failed to withdraw, either!
If you forgot to take an RMD—all hope is not lost if you have not filed your income taxes yet. There are a few steps you can take that can increase your chances of dodging that hefty penalty. You need to request a waiver of that penalty when you file your return.
How to request a waiver if you forgot to take an RMD
- The minute you realize you forgot to take an RMD, go withdraw the distribution!
- Prepare Form 5329, which details the missed distribution penalty.
- Write a letter to the IRS to tell them why you missed this withdrawal.
- Submit the form and letter with your tax return.
You must have a reasonable cause to have missed taking your RMD, which you’ll detail in your letter—and hopefully the IRS approves your waiver. We highly recommend you consult appropriate counsel to help you with the letter and the form, but the instructions to Form 5329 can help you better understand the implications and the waiver. If you have any questions, please contact us.