Today TaxMama® hears from Sonia in the TaxQuips Forum, who has this quickie question. “I contacted the custodian of my IRA AT 3 PM on 12/31 to request a required minimum distribution (RMD). The transaction ended up being dated 1/1. Will the 50% penalty apply? If so, how can I apply for relief?”
Dear Sonia,
There IS a way to get penalty relief on RMDs, IF reasonable steps were taken to take the required minimum distribution.
Calling the custodian at 3 pm on New Year’s Eve, when most people have already left for the holiday, and expecting the transaction to be done that day is, well…not exactly reasonable.
But you can certainly request penalty relief. And if this is the first error or the first RMD, you are apt to get the penalty waived. Mike Reed, EA confirms that he gets these penalties waived regularly.
Please follow this procedure, which is explained on the IRS RMD FAQs. The worst they can do is to say, “No.” Be sure to explain why the request was made at the last minute.
Did you not know about this responsibility until then? And how did you suddenly find out? Why will this never happen again?
And folks, any time you have deadline-based transactions, perform them at least a week early. Not at the last minute. Especially if you must rely on someone else to process the transaction for you. Otherwise, not only will there be penalties; but missing the deadline may make it impossible for you to get the relief or results you wanted to achieve.
And remember, you can find answers to all kinds of questions about IRS penalties and other tax and business issues, free. Where? Where else? At www.TaxMama.com.
Please post all Comments and Replies in the new TaxQuips Forum .
