RMD not completed by 12/31/12

[Cynchbeast]

We have client with funds in John Hancock. Owner was instructed to take RMD of $3,893 BEFORE 12/31/12. We provided him with JH form, which we just got back from him in the mail YESTERDAY asking if it was completed properly.

Does anyone see any way we can have this treated as a 2012 RMD as it was intended in order to avoid the penalty?

[Tom Poje]

I assume you to mean that the owner has taken min distrib in the past and is simply late this year. otherwise of course you have until 4/1. that being said,

I suspect most people would simply ignore it and get on with life.

but really what should be done

is you simply ask the penalty be waived. basically in this case you have all the bells and whistles in place and it doesn't appear tax avoidance is an issue.

you then follow the following steps (ignoring what little attempt at humor is included in the comments)

•You can’t ask for the penalty to be waived until you have actually taken the distribution. This is proof you are trying to fix the situation as soon as possible.

•Fill out form 5329.

•Write letter begging for mercy, explaining the reason you didn’t receive the minimum distribution was the incompetence of the investment house or something similar.

•Years ago, it was required to send in the 50% penalty and hope the IRS would have leniency and waive the penalty and return the money. Now simply send in the letter with the Form 5329, and if they don’t accept your lame excuse they will bill you.

......

all comments aside, with the govt as deep in debt as it is, who knows what they wil start doing in an effort to raise $. It still boils down to an owner being late. if you are late with a credit card payment you pay the price.

[ESOP Guy]

It has been a few years since I wrote one of those letter to the IRS. But so far my experience has been they waive the penalty. It helps if you can make a case that this really was a one time event and it was fixed quickly.

Then bill your client for all your time for the letter writing and so forth. That added cost is often enough to help them remember to get it done on time.

[BG5150]

When did you send him the form?

Did you follow up with him or JH to see if the RMD was done?

Did you impress upon the Employer that not only was the RMD an individual tax issue, but a plan qualification issue as well?

I agree with those above int hat you make sure the RMD is done and then write a mea culpa (or a JH culpa) saying "I really meant to do this on time, but someone messed up."

And, an RMD does NOT require the signature of the participant, just an authorized signer of the plan, so if there is someone else at the company that signs off on forms, it could have been done before 12/31.

[Cynchbeast]

Thank you all for very helpful suggestions.

[mbozek]

What plan requires that a participant must request an RMD each year? RMDs are supposed to be automatic. Since participant's signature is not required to commence RMDs there is no requirement for participant's consent for RMDs in any subsequent year.