Thank you for putting this video on youtube . This helps very much after receiving a call from my financial custodian. Hopefully I won’t be required to pay the penalty .
question - inherited small roth ira ($2200) from father when he passed away in 2013 - just discovered I should have been taking RMDS - how do I figure out what my RMDs should have been for almost 10 years?
[1:54pm PST] @SaintOres.com Hello Esteban, Roth IRAs don't have required minimum distributions during the original owner's lifetime. Those rules change for the owner's heirs. Generally, heirs must empty the Roth IRA of all funds within 10 years of the original owner's death. A retirement law passed in 2019 created the 10-year time frame. Previously, you could spread inherited Roth IRA withdrawals over your lifetime. However, the new rules apply to Roth IRAs inherited in 2020 or later. In your case, the old "stretch" rules should still apply to you. Please contact the financial institution that holds the IRA account and see what they can do.
Also you state ar 3:20 to pay the tax but later at 5:59 say that the tax will be assessed on the combined distributions for the following year using 1099s. I'm confused by this. Can you please explain?
9:06am PST SaintOres.com Hello Snipely, If you miss your RM, You don't actually calculate income tax on the missed distribution itself. It is a 25% penalty tax on the unwithdrawn amount. This penalty must be reported on Form 5329 for the year that you were supposed to take the RMD. However, the penalty can be reduced to 10% if you correct the mistake within two years of the missed deadline. You can also request a waiver of the penalty by filing Form 5329 with a letter explaining your "reasonable cause" for missing the deadline.
@@KatieStOresCFPChFCEA ok, so you meant pay the penalty at 3:20, not a tax on the distribution. Got it. I plan to file a waiver so there won't be consequences until I file next year with 1099s showing combined totals. I don't expect the banks to break this up into early and late 2024 withdrawals.
Thanks very much for this video! It answers lots of my questions. One thing I don´t completely understand: In one segment you say that any taxes on the late RMD should be paid along with filing the 5329 form, later you say the late distribution will be treated as income of the year the distribution actually took place and taxed as income of that year. Please clarify, thanks so much!
Hello Adrian, If you missed taking your RMD, you need to file IRS Form 5329 to report the missed distribution and calculate the penalty. When you file this form, you should also pay any penalties due for the late RMD. The actual distribution, when you take it, will be treated as income in the year you receive it. This means it will be included in your taxable income for that year and taxed at your ordinary income tax rate.
@@KatieStOresCFPChFCEA Thanks for your fast reply! But regarding penalties: If I understood what you said in the video correctly then I should not pay the penalty, but explain why the RMD was late and ask the IRS to waive the penalty, correct?
Hello Adrian, You should not pay the excise tax upfront when requesting a waiver for a late RMD. Following the instructions on Form 5329 will ensure that you're properly requesting the waiver and avoiding unnecessary payments. If the IRS does not grant your waiver request, you will receive a notification and be instructed to pay the excise tax at that time.
@@KatieStOresCFPChFCEA Great, thanks very much for your reply. I have one more question, if I may: As I understand the RMD is calculated based on the previous year end balance and other factors (age/ life expectancy) etc. If several RMDs where missed in a row, does the year end balance rule count the same for every individual year? Because missed RMDs of course make the balance higher than it should have been for the following year´s RMD etc. Thanks very much for your help.
You’re correct, RMDs are calculated based on the previous year’s end balance and your life expectancy factor. If RMDs are missed, the year-end balance for each subsequent year would indeed be higher than it would have been if the RMDs had been taken as required. This higher balance will then be used to calculate the RMD for the following year, potentially resulting in larger RMDs. Each year’s RMD is calculated independently based on the year-end balance of the previous year and the applicable life expectancy factor. So, if RMDs were missed, the balance used for each year’s calculation would reflect those missed distributions, leading to a compounding effect.
I inherited a 401k in 2019. I wasn’t aware that I was supposed to take RMDs until 2022. I took one large distribution this year in 2023 to make up for 2021 and 2022 (I believe 2020 RMDs were waived for the pandemic). I plan on taking another distribution for this year 2023. Should I file three separate 5329 forms for years 2021, 2022, and 2023 with my 2022 tax return? I haven’t filed yet for the 2022 tax year. Can I include these forms and my explanation when filing with TurboTax? What are some valid reasons to waive penalty? I wasn’t aware of RMDs as this was my first time learning about IRAs, I was focused on handling probate duties as a admin of an estate, and was emotionally distressed and overwhelmed while grieving during this time 😢 Thanks for your time and the video explanation.
Hello Jesse, If you miss an RMD from a qualified retirement plan, you must file a separate Form 5329 for each year that you missed the RMD. Reasonable cause for a penalty waiver includes things like: A serious illness or disability, A death in the family, A natural disaster, A financial hardship, A mistake made by the financial institution holding the IRA, I'm unsure if Turbotax will let you file Form 5329 with your tax return.
Hello Dante, Sorry for the loss of your Father. You might want to try writing a letter to the IRS and explain the situation. Or better yet, find an Enrolled Agent and have them write it for you. I have found them to be very understanding in such matters.
@@KatieStOresCFPChFCEA - Hello Katie. Thank you kindly for responding back. Do you know where I can find an Enrolled Agent? I live in Southern California. I recently found a Financial Advisor who brought this to my attention. He indicated that they will issue 4 separate checks, I then need an "Oooops" letter to the IRS. I would to make sure this is filed properly making sure that the IRS forgives the penalty. It this point, I do not mind absorbing any cos to assist me with the letter. Yours Kindly..Dante
Sure I can help you with finding an Enrolled Agent. You can google 'Find a Tax Expert" or here is the link to the NAEA's website directory of agents.... taxexperts.naea.org/expertdirectory If you can find one with also a CFP, that would be best. Good luck.
Is there a way to do this in efile software, or would I have to send US Mail? Not sure how you could attach the statement of explanation and confirmation that you withdrew later (check).
[4:03 AM PST] @SaintOres.com Hello MD, I'm updating that video so it's funny you asked me this question. Form 5329 is used to report additional taxes on retirement plans and individual retirement accounts (IRAs). If you need to file this form, you will likely need to have an understanding of the tax laws surrounding retirement accounts and distributions. To fill out and file Form 5329, follow these steps: 1...Download the form from the IRS website. Here's the link: www.irs.gov/forms-pubs/about-form-5329 2...Enter your personal information, including your name, address, and Social Security number. 3...Complete Part I if you are filing the form to report a 10% additional tax on early distributions from retirement plans or IRAs. 4...Complete Part II if you are filing the form to report a 6% additional tax on excess contributions to your retirement accounts. 5...Complete Part III if you are filing the form to report a 50% additional tax on required minimum distributions that you did not take. 6...Make sure to include any required documentation to support your entries on the form. 7...Calculate the total tax amount owed, if any, and include it with your tax return. 8...File the form and any necessary tax payment with the IRS by the tax deadline. ****It's important to note that the instructions for Form 5329 can be complicated, and it may be helpful to consult with a tax professional or use tax preparation software to ensure that you are completing the form accurately.
@@KatieStOresCFPChFCEA Thanks for taking the time to reply. I need to fill out form 5329 (2022) to avoid the RMD 50% penalty. That said, can I still file it electronically separately because I already file my 2022 tax return?
[5:05 PM PST] @SaintOres.com Hello again, Isn't tax season fun???? Yes, you can file Form 5329 (2022) electronically separately from your 2022 tax return if you have already filed your tax return (Although it might depend on your tax software). You can file Form 5329 using the IRS e-file system through your own tax preparation software. (You can also print out the form and mail it to the IRS if your software doesn't let you). When you file Form 5329, make sure to include all necessary information, including the amount of the required minimum distribution (RMD), the amount of any RMD that was taken, and any exceptions that apply to your situation. It's important to file Form 5329 by the deadline to avoid the 50% penalty for not taking the RMD. For 2022, the deadline for taking an RMD WAS December 31, 2022, and the deadline for filing Form 5329 to avoid the penalty is April 17, 2023, unless you file for an extension.
@@KatieStOresCFPChFCEA Much appreciated. No, tax season isn't fun. Is there a video showing how to file form 5329 separately using the IRS e-file system? In the event that the software does not allow me to file it, what is the address I should mail it to? You rock.
First off, I don't know of a video on this. You could make one afterwards. Sorry, I shouldn't have had the word or in there. Let me be more precise. To file form 5329 separately using the IRS e-file system, you will need to use a tax preparation software that supports this form. (Mine does, not too sure yours will. That's why I mentioned mailing it in). If the software does not allow you to file the form, you can print and mail it separately. To mail the form, you will need to send it to the appropriate IRS processing center based on your state of residence. The address to use will depend on whether you are enclosing a payment or not. You can find the appropriate mailing address for your state in the instructions for Form 5329 or on the IRS website. (the link I sent you before.) Please note that the mailing address may change, so be sure to check the most up-to-date information on the IRS website before mailing your form.
Hello Thomas, It depends... Form 5329 is typically filed with your federal income tax return. You would send your completed Form 5329 to the address listed in the instructions for your tax return. The address can vary depending on where you live and whether you are including a payment with your return. For example, if you are filing a Form 1040 (U.S. Individual Income Tax Return) without a payment, you would send your Form 5329 to the address listed in the instructions for Form 1040, which can be found on the IRS website. If you are including a payment with your return, you would send it to a different address, also listed in the instructions. Here's the link for the addresses... www.irs.gov/filing/where-to-file-addresses-for-taxpayers-and-tax-professionals-filing-form-1040-es
Clearest explanation I have seen on this subject. However, I do have a question: if you need to send in the tax due on your delinquent distribution with form 5329, how is that tax calculated?
[1:02pm PST] @TaxesbyKatie.com Hello Nessuno, Please refer to the IRS instructions for 5329. www.irs.gov/pub/irs-pdf/i5329.pdf. It will be much easier if you use tax preparation software.
@@KatieStOresCFPChFCEA -- Thanks for taking the time to reply. I had not encountered that .pdf before in my searches and I believe it answers all my questions.
Thank you for putting this video on youtube . This helps very much after receiving a call from my financial custodian. Hopefully I won’t be required to pay the penalty .
[10:44am PST] @SaintOres.com
Thanks V, I'm glad it was helpful.
question - inherited small roth ira ($2200) from father when he passed away in 2013 - just discovered I should have been taking RMDS - how do I figure out what my RMDs should have been for almost 10 years?
[1:54pm PST] @SaintOres.com
Hello Esteban, Roth IRAs don't have required minimum distributions during the original owner's lifetime. Those rules change for the owner's heirs. Generally, heirs must empty the Roth IRA of all funds within 10 years of the original owner's death.
A retirement law passed in 2019 created the 10-year time frame.
Previously, you could spread inherited Roth IRA withdrawals over your lifetime. However, the new rules apply to Roth IRAs inherited in 2020 or later. In your case, the old "stretch" rules should still apply to you. Please contact the financial institution that holds the IRA account and see what they can do.
How do you calculate taxes for the year of the missed distribution when it didn't happen in that year?
Also you state ar 3:20 to pay the tax but later at 5:59 say that the tax will be assessed on the combined distributions for the following year using 1099s. I'm confused by this. Can you please explain?
9:06am PST SaintOres.com
Hello Snipely, If you miss your RM, You don't actually calculate income tax on the missed distribution itself. It is a 25% penalty tax on the unwithdrawn amount. This penalty must be reported on Form 5329 for the year that you were supposed to take the RMD. However, the penalty can be reduced to 10% if you correct the mistake within two years of the missed deadline. You can also request a waiver of the penalty by filing Form 5329 with a letter explaining your "reasonable cause" for missing the deadline.
@@KatieStOresCFPChFCEA ok, so you meant pay the penalty at 3:20, not a tax on the distribution. Got it. I plan to file a waiver so there won't be consequences until I file next year with 1099s showing combined totals. I don't expect the banks to break this up into early and late 2024 withdrawals.
Thanks very much for this video! It answers lots of my questions.
One thing I don´t completely understand: In one segment you say that any taxes on the late RMD should be paid along with filing the 5329 form, later you say the late distribution will be treated as income of the year the distribution actually took place and taxed as income of that year. Please clarify, thanks so much!
Hello Adrian, If you missed taking your RMD, you need to file IRS Form 5329 to report the missed distribution and calculate the penalty. When you file this form, you should also pay any penalties due for the late RMD. The actual distribution, when you take it, will be treated as income in the year you receive it. This means it will be included in your taxable income for that year and taxed at your ordinary income tax rate.
@@KatieStOresCFPChFCEA Thanks for your fast reply! But regarding penalties: If I understood what you said in the video correctly then I should not pay the penalty, but explain why the RMD was late and ask the IRS to waive the penalty, correct?
Hello Adrian, You should not pay the excise tax upfront when requesting a waiver for a late RMD. Following the instructions on Form 5329 will ensure that you're properly requesting the waiver and avoiding unnecessary payments.
If the IRS does not grant your waiver request, you will receive a notification and be instructed to pay the excise tax at that time.
@@KatieStOresCFPChFCEA Great, thanks very much for your reply. I have one more question, if I may: As I understand the RMD is calculated based on the previous year end balance and other factors (age/ life expectancy) etc. If several RMDs where missed in a row, does the year end balance rule count the same for every individual year? Because missed RMDs of course make the balance higher than it should have been for the following year´s RMD etc. Thanks very much for your help.
You’re correct, RMDs are calculated based on the previous year’s end balance and your life expectancy factor. If RMDs are missed, the year-end balance for each subsequent year would indeed be higher than it would have been if the RMDs had been taken as required. This higher balance will then be used to calculate the RMD for the following year, potentially resulting in larger RMDs.
Each year’s RMD is calculated independently based on the year-end balance of the previous year and the applicable life expectancy factor. So, if RMDs were missed, the balance used for each year’s calculation would reflect those missed distributions, leading to a compounding effect.
I inherited a 401k in 2019. I wasn’t aware that I was supposed to take RMDs until 2022.
I took one large distribution this year in 2023 to make up for 2021 and 2022 (I believe 2020 RMDs were waived for the pandemic). I plan on taking another distribution for this year 2023.
Should I file three separate 5329 forms for years 2021, 2022, and 2023 with my 2022 tax return? I haven’t filed yet for the 2022 tax year.
Can I include these forms and my explanation when filing with TurboTax?
What are some valid reasons to waive penalty? I wasn’t aware of RMDs as this was my first time learning about IRAs, I was focused on handling probate duties as a admin of an estate, and was emotionally distressed and overwhelmed while grieving during this time 😢
Thanks for your time and the video explanation.
Hello Jesse, If you miss an RMD from a qualified retirement plan, you must file a separate Form 5329 for each year that you missed the RMD. Reasonable cause for a penalty waiver includes things like: A serious illness or disability, A death in the family, A natural disaster, A financial hardship, A mistake made by the financial institution holding the IRA, I'm unsure if Turbotax will let you file Form 5329 with your tax return.
You answered all my questions! Great video. Thank you.
[1:14pm PST] @SaintOres.com
Thanks Gilbert, I'm glad you have no questions since I'm all out of answers.
Very informative. Thank you !!! Unfortunately, I missed 4 years of RMD. I was going thru the death of my Father and Probate.
Hello Dante, Sorry for the loss of your Father. You might want to try writing a letter to the IRS and explain the situation. Or better yet, find an Enrolled Agent and have them write it for you. I have found them to be very understanding in such matters.
@@KatieStOresCFPChFCEA - Hello Katie. Thank you kindly for responding back. Do you know where I can find an Enrolled Agent? I live in Southern California. I recently found a Financial Advisor who brought this to my attention. He indicated that they will issue 4 separate checks, I then need an "Oooops" letter to the IRS. I would to make sure this is filed properly making sure that the IRS forgives the penalty. It this point, I do not mind absorbing any cos to assist me with the letter. Yours Kindly..Dante
Sure I can help you with finding an Enrolled Agent. You can google 'Find a Tax Expert" or here is the link to the NAEA's website directory of agents.... taxexperts.naea.org/expertdirectory If you can find one with also a CFP, that would be best. Good luck.
@@KatieStOresCFPChFCEA - Thank you kindly for the information. Much appreciated !!!
You're welcome....
First off thank you thank you for these so incredibly detailed videos thank you. Can you show a offer and compromise to irs for tax debt please
[9:52am PST] @SaintOres.com
Hello Gary, Yes, that would make a great video. I'll try and do it after the 'tax software' videos I'm doing now.
Great video
Thanks John, I appreciate the "Great" comment.
great video.
Thanks HD, That was one of my first videos awhile ago. Glad you enjoyed it
Is there a way to do this in efile software, or would I have to send US Mail? Not sure how you could attach the statement of explanation and confirmation that you withdrew later (check).
Thanks, Very helpful.
[9:43 AM PST] @SaintOres.com
Thanks Adam, Glad you found it useful.
Hi, how do you fill out form 5329 and file it? The video was not clear on this subject matter..
[4:03 AM PST] @SaintOres.com
Hello MD, I'm updating that video so it's funny you asked me this question.
Form 5329 is used to report additional taxes on retirement plans and individual retirement accounts (IRAs). If you need to file this form, you will likely need to have an understanding of the tax laws surrounding retirement accounts and distributions.
To fill out and file Form 5329, follow these steps:
1...Download the form from the IRS website. Here's the link: www.irs.gov/forms-pubs/about-form-5329
2...Enter your personal information, including your name, address, and Social Security number.
3...Complete Part I if you are filing the form to report a 10% additional tax on early distributions from retirement plans or IRAs.
4...Complete Part II if you are filing the form to report a 6% additional tax on excess contributions to your retirement accounts.
5...Complete Part III if you are filing the form to report a 50% additional tax on required minimum distributions that you did not take.
6...Make sure to include any required documentation to support your entries on the form.
7...Calculate the total tax amount owed, if any, and include it with your tax return.
8...File the form and any necessary tax payment with the IRS by the tax deadline.
****It's important to note that the instructions for Form 5329 can be complicated, and it may be helpful to consult with a tax professional or use tax preparation software to ensure that you are completing the form accurately.
@@KatieStOresCFPChFCEA Thanks for taking the time to reply. I need to fill out form 5329 (2022) to avoid the RMD 50% penalty. That said, can I still file it electronically separately because I already file my 2022 tax return?
[5:05 PM PST] @SaintOres.com
Hello again, Isn't tax season fun???? Yes, you can file Form 5329 (2022) electronically separately from your 2022 tax return if you have already filed your tax return (Although it might depend on your tax software). You can file Form 5329 using the IRS e-file system through your own tax preparation software. (You can also print out the form and mail it to the IRS if your software doesn't let you). When you file Form 5329, make sure to include all necessary information, including the amount of the required minimum distribution (RMD), the amount of any RMD that was taken, and any exceptions that apply to your situation. It's important to file Form 5329 by the deadline to avoid the 50% penalty for not taking the RMD. For 2022, the deadline for taking an RMD WAS December 31, 2022, and the deadline for filing Form 5329 to avoid the penalty is April 17, 2023, unless you file for an extension.
@@KatieStOresCFPChFCEA Much appreciated. No, tax season isn't fun. Is there a video showing how to file form 5329 separately using the IRS e-file system? In the event that the software does not allow me to file it, what is the address I should mail it to? You rock.
First off, I don't know of a video on this. You could make one afterwards.
Sorry, I shouldn't have had the word or in there. Let me be more precise.
To file form 5329 separately using the IRS e-file system, you will need to use a tax preparation software that supports this form. (Mine does, not too sure yours will. That's why I mentioned mailing it in). If the software does not allow you to file the form, you can print and mail it separately.
To mail the form, you will need to send it to the appropriate IRS processing center based on your state of residence. The address to use will depend on whether you are enclosing a payment or not. You can find the appropriate mailing address for your state in the instructions for Form 5329 or on the IRS website. (the link I sent you before.)
Please note that the mailing address may change, so be sure to check the most up-to-date information on the IRS website before mailing your form.
If I filled it out by hand, what's the address I send the 5329 to (for the life of me I can't find the actual address this goes to)?
Hello Thomas, It depends... Form 5329 is typically filed with your federal income tax return.
You would send your completed Form 5329 to the address listed in the instructions for your tax return. The address can vary depending on where you live and whether you are including a payment with your return.
For example, if you are filing a Form 1040 (U.S. Individual Income Tax Return) without a payment, you would send your Form 5329 to the address listed in the instructions for Form 1040, which can be found on the IRS website. If you are including a payment with your return, you would send it to a different address, also listed in the instructions.
Here's the link for the addresses... www.irs.gov/filing/where-to-file-addresses-for-taxpayers-and-tax-professionals-filing-form-1040-es
Clearest explanation I have seen on this subject. However, I do have a question: if you need to send in the tax due on your delinquent distribution with form 5329, how is that tax calculated?
[1:02pm PST] @TaxesbyKatie.com
Hello Nessuno, Please refer to the IRS instructions for 5329. www.irs.gov/pub/irs-pdf/i5329.pdf. It will be much easier if you use tax preparation software.
@@KatieStOresCFPChFCEA -- Thanks for taking the time to reply. I had not encountered that .pdf before in my searches and I believe it answers all my questions.
[12:51pm PST] @TaxesbyKatie.com
I have to read all those government .pdf's. Most are useful, all are boring.
The title is not clear
Hey Alicia, I will change the title to make it more obvious to everyone. Thanks for the input.
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