Waiver of 50% Excise Tax for RMD Failure

[Guest Dash02]

A friend's mother failed to recieve her RMD in 2005 with respect to her IRA. On page 50 of Publication 590, the IRS provides that in order to request a waiver, Form 5329 should be filed with Form 1040, that the excise tax be paid, and that a letter of explanation be attached. However, Reg. section 54-4974-2 Q&A-7 does not require that such tax be paid in order to request a waiver.

I have the following questions:

1. Should the 50% excise tax be self-imposed and paid with mom's 2005 Form 1040?

2. As a practical matter, how lenient has the IRS been in waiving this tax (In past years, mom has always taken the RMD, but in 2005, she misplaced and forgot about the inquiry she received from the IRA trustee).

Thanks.

[Appleby]

From my experience, the IRS has always waived the penalty for individual who miss the RMD once or twice. From what I understand, they may not be as lenient with those who habitually miss their RMD.

The recommendation is to pay the penalty and request the waiver.

However, a CPA friend of mine says she usually doe not have client pay the penalty. Instead, she makes sure the RDM is withdrawn very early the next year, and attach a letter of explanation to the IRS, along with proof that the RMD has been satisfied- such as a copy of the account statement, and the IRS has not provided an unfavorable response to date.

[Guest Dash02]

Thanks Appleby for the helpful post. It's much appreciated.

Peace.