RMD – Minimum Distribution Problem

Today TaxMama hears from Anthony in the TaxQuips Forum with a common problem. “I have a client who stopped working at 81 because he had a stroke and had to go into a nursing home. He had a Sec. 457 plan, which allowed him to put off taking distributions until he terminated employment. But he was in no condition to think about taking that required minimum distribution – so it was missed for 2008.
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What should I do to get the 50% penalty waived?

Dear Anthony,

Kris Hix, EA says you can request a waiver on Form 5329, part VIII.  Fill it out, and also attach a statement with what is going on.

  Explain that he just quit working and in the meantime, went into a nursing home.

While, I don’t see a place in Part VIII of Form 5329 to request a waiver of the penalty. Just a place to compute the penalty.

It turns out that Kris is right. The last page of the instructions to Form 5329 contains the steps to follow to request a waiver of the penalties.

 So Anthony, include a cover letter explaining the client’s circumstances and his incapacity.
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  IMPORTANT! Explain that, from now on, his daughter will be handling the distributions and will make sure he is in compliance.  IRS wants assurance of future compliance whenever they waive a penalty.

And remember, you can find answers to all kinds of questions about getting penalties abated and other tax issues, free. Where? Where else? At www.TaxMama.com.

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