khr Posted August 26, 2020 Share Posted August 26, 2020 A participant rolled over his entire balance to an IRA in 2019 without taking his RMD prior to the rollover. He will be taking the RMD now as it was just discovered. Is the only course of action to remedy the missed RMD by filing through VCP? Link to comment Share on other sites More sharing options...
Belgarath Posted August 26, 2020 Share Posted August 26, 2020 Here's an older thread that may be helpful. Link to comment Share on other sites More sharing options...
Bri Posted August 26, 2020 Share Posted August 26, 2020 My vote is for: 1. Fix the 1099-R from the plan for 2019, as there should be one for the proper rollover amount, and one for the RMD amount due as a taxable payment. 2. The RMD payment was an ineligible rollover contribution to the IRA, so pay that penalty tax due for that, if any, and get it out (as adjusted for earnings) from the IRA. Link to comment Share on other sites More sharing options...
Luke Bailey Posted August 26, 2020 Share Posted August 26, 2020 And as an individual he or she needs to file Form 5330 following the instructions to request relief from the 50% excise tax. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
ALS Posted August 27, 2020 Share Posted August 27, 2020 I realize you're supposed to correct the 1099-R into two...one for the rollover and one for the RMD as a taxable payment per the 1099-R instructions. So the participant will pay taxes on what should have been the RMD. Now, when the IRA removes it (with earnings) how does the reporting for that work so that the participant doesn't get two 1099-Rs for the RMD? Link to comment Share on other sites More sharing options...
Luke Bailey Posted August 27, 2020 Share Posted August 27, 2020 Maybe the IRA 1099-R should use Code P? Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
ALS Posted August 28, 2020 Share Posted August 28, 2020 What if it got rolled to another qualified plan and that plan had to distribute it? Looking at the 1099-R instructions, is P only for IRAs to use? I've never fully understood how this should work so that the participant doesn't get two taxable 1099-Rs. Link to comment Share on other sites More sharing options...
Luke Bailey Posted August 28, 2020 Share Posted August 28, 2020 ALS, my thought was that the plan would issue two corrected 1099-R's for 2019, as you explained in your last post, to show that a portion was taxable RMD and not eligible for rollover, and then the IRA would report its distribution as an excess that was subject to tax in 2019, per the plan 1099-R. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Appleby Posted August 31, 2020 Share Posted August 31, 2020 On 8/28/2020 at 5:10 PM, Luke Bailey said: ALS, my thought was that the plan would issue two corrected 1099-R's for 2019, as you explained in your last post, to show that a portion was taxable RMD and not eligible for rollover, and then the IRA would report its distribution as an excess that was subject to tax in 2019, per the plan 1099-R. Right. Assuming the individual filed his/her tax return by the due date, the deadline for correcting the ineligible rollover is October 15, 2020. Meeting this deadline means that the 6% excise tax is avoided. Any net income attributable (NIA) must be included. Some custodians will calculate the NIA. if this IRA custodian won't, the instructions in IRS Pub 590 can be used - Page 32 of the 2019 version https://www.irs.gov/pub/irs-pdf/p590a.pdf 1099-R should show return of excess as nontaxable. Earnings would be taxable in 2019- indicated by a Code P in box 7. Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
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