I realize that RMDs are not required this year, but my mom is receiving them anyway. Wishing to know if her custodian is computing her RMD correctly.
The facts:
Birthday: April, 1933 (age 76) Spouse age: 78 IRA in single account
When I divide her IRA 12/31/08 balance by the annualized amount of this year's monthly withdrawals, I get an exact ratio of 23.8, which is correct for a 74-year-old (using the Uniform Lifetime Table).
Did I do this correctly? If they are not computing correctly (and have not done so since age 70), what do we need to do with the IRS for past years?
You said she is 76 in 2009. As such, her 2009 RMD, (had she required one), would be the 12/31/08 balance divided by 22.0, per the IRS Uniform Lifetime Table. See Table III in the Appendix of IRS Pub 590.
In 2008, the divisor should have been 22.9. In 2007, when she was age 74, the divisor should have been 23.8.
One obvious first step is to contact the custodian and verify the birthdate they have on file. Also determine if every year involved has the same problem, or just 2009.
As for the IRS, here is an excerpt from the Pub 590 instructions. If you can confirm the custodian made an error, I think you have a good case for requesting a waiver of the penalty (excise tax).
"Tax on excess. If distributions are less than the required minimum distribution for the year, discussed earlier under When Must You Withdraw Assets? (Required Minimum Distributions) , you may have to pay a 50% excise tax for that year on the amount not distributed as required.
"Reporting the tax. Use Form 5329 to report the tax on excess accumulations. See the discussion of Form 5329, later, under Reporting Additional Taxes , for more information on filing the form.
"Request to waive the tax. If the excess accumulation is due to reasonable error, and you have taken, or are taking, steps to remedy the insufficient distribution, you can request that the tax be waived. If you believe you qualify for this relief, attach a statement of explanation and complete Form 5329 as instructed under Waiver of tax in the Instructions for Form 5329. "
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.