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?
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.
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