By Ian Berger, JD
IRA Analyst
Question:
Ed,
I read your 2/28/22 Slott Report on the updated SECURE Act information for non-eligible designated beneficiaries (non-EDBs) that requires annual RMDs to continue if the original owner was taking them prior to his death and also requires the account to be emptied by the end of year 10.
Since the Roth IRA does not have RMDs, is it correct to assume that the non-EDB of an inherited Roth IRA would also not be required to take RMDs and only be subjected to the 10-year rule?
Thank you.
Answer:
You are correct. The new IRS regulations specifically say that Roth IRA owners are considered to have died before their RMD required beginning date (RBD). Since the new annual RMD requirement applies only when an IRA owner dies on or after his RBD, beneficiaries of inherited Roth IRAs are spared from this rule. However, those beneficiaries still have to empty the account by December 31 of the 10th year following death.
Question:
I will try to be brief.
I do taxes for an 80+ year old lady with an IRA. She said she never received a letter from the company she has her IRA with to let her know she needed to take a withdrawal for 2021. The company, of course, says they did.
I am trying to find a way to rectify this situation. She is filling out the paperwork for the 2021 RMD, but because she is two months past the due date, technically she owes the penalty. Should we file her taxes for 2021 and just wait for the IRS to catch up with this?
Thank you,
Chuck
Answer:
Hi Chuck,
There is a 50% excise tax for missing an RMD. However, the IRS will usually waive that penalty if the IRA owner takes the RMD and files Form 5329 with the IRS. The Form 5329 should include an attachment explaining why your client did not take the 2021 RMD. She does not need to pay the excise tax unless the IRS comes back and assesses it (which is unlikely).
https://www.irahelp.com/slottreport/new-irs-secure-act-regulations-and-missed-rmds-today%E2%80%99s-slott-report-mailbag