TODAY'S PAPER
Good Evening
Good Evening
LifestyleRetirement

Widow must take missed Required Minimum Distribution

My dad passed away in December. His 2015 Required Minimum Distribution was $17,000, but he had only taken out $6,460 before he died. What do we do about the missing $10,540? Taxes should be paid on the RMD when my mom gets her taxes done.

She won’t owe taxes on your father’s missing $10,540 distribution until April 2017 because she’ll take it from his IRA this year.

When an IRA owner dies before taking all of his annual Required Minimum Distribution, his beneficiary — in this case, presumably, your mother — must take the distribution for him.

“She should immediately take out the $10,540 your father didn’t take in 2015, and file Form 5329 to report the missed distribution,” says Ed Slott, a Rockville Centre IRA expert. “She can write a one-sentence explanation on the form, like ‘Distribution missed due to taxpayer’s death and taken immediately upon discovery.’ ”

The penalty for failing to take an RMD is 50 percent of the amount that should have been taken. In this case, that would be $5,270. But the IRS waives the penalty when the missed distribution is taken as soon as possible and Form 5329 is filed with a reasonable explanation, says Slott. Your mother doesn’t have to pay the penalty and wait for it to be refunded, he adds. But she must file the form in order to get a waiver.

Her own first RMD as a beneficiary must be taken by Dec. 31 of the year after your father’s death — i.e., Dec. 31, 2016. To keep a clear paper record, it’s a good idea for her to take your father’s missed RMD and her own RMD in two separate distributions, says Slott.

THE BOTTOM LINE You should take a missed RMD as soon as possible, and report it to the IRS.

WEBSITES WITH MORE INFORMATION nwsdy.li/RMD and nwsdy.li/morn

More Lifestyle