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What Happens If You Did Not Take Your 2010 Required Minimum Distribution (RMD)?

This is the time of the year when missed required distributions (RMDs) for the prior year surface. Do you know what needs to be done to correct the situation?

The first step is to calculate the 2010 RMD on all owned IRA accounts (those RMDs can then be added together) and withdraw the amount necessary to meet that total. The distribution can come from any one or more of your owned IRAs. You cannot take an IRA distribution from any other type of retirement account such as a 401(k). RMDs for inherited accounts are calculated and distributed separately.

Since this distribution is taken in 2011, it will be taxable for 2011. You cannot put it on your 2010 tax return even though it is a required distribution for 2010.

You will have to file Form 5329 with your 2010 tax return to report the amount not taken and to calculate the penalty. The penalty is 50%, that is not a typo, 50% of the amount not taken. IRS can waive the penalty for good cause. To request a waiver, attach a letter to the form explaining the circumstances and requesting the waiver. Keep the explanation short. If you do not hear from IRS in three years, they have granted the waiver request.


By IRA Technical Consultant Beverly DeVeny and Jared Trexler
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*Copyright 2011 Ed Slott and Company, LLC

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