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Waiver of 401(a)(9) Penalties for Employee Owner under VCP


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Schedule H to the Form 14568 requires an explanation as to why the IRS should waive penalties under 4974 in the case of an employee-owner who failed to take RMDs on schedule. What are the circumstances that would qualify here? I am not sure why you need an explanation specifically for an employee owner and not anyone who doesn't take an RMD. Thanks. 

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I have encountered this in the past. If the reason RMDs were not made was because the recordkeeper failed to implement them, mention that and the IRS should accept it. If the real reason that the RMDs were not taken was because the owner did not want to receive them, then they are unlikely to waive the excise tax. It has to be something under the control of a third party vendor such as a recordkeeper or trustee and not because the owner did not want them or an HR employee was told not to make them for fear of having the owner cut their budget.

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