IRS - Inherited IRA - Missed 5 year deadline to withdraw

[marshall_langman_86]

I inherited an IRA and missed the deadline (by only a few months) to take the full disbursement (i took nothing out). Is this an easy fix like withdrawing it all, now, and sending a letter to the IRS asking for forgiveness come tax time next year? Or do i need a specialized tax lawyer to take over the case and charge me a fortune?

I know theres now a 50% forfeiture penalty on the account; i'm trying to avoid that, of course.

thanks in advance!

 

[LdiJ]

I inherited an IRA and missed the deadline (by only a few months) to take the full disbursement (i took nothing out). Is this an easy fix like withdrawing it all, now, and sending a letter to the IRS asking for forgiveness come tax time next year? Or do i need a specialized tax lawyer to take over the case and charge me a fortune?

I know theres now a 50% forfeiture penalty on the account; i'm trying to avoid that, of course.

thanks in advance!

How much money is in the account?

 

[marshall_langman_86]

a good amount...enough to make paying someone to fix it worth it. 85k.

 

[LdiJ]

Then yes, I would recommend a tax attorney.

 

[Zigner]

Why did you miss the deadline?

 

[marshall_langman_86]

Why did you miss the deadline?

Because i just wasnt aware of it. My accountant has been doing my taxes and saw those accounts for 5 years and didnt say anything and the investment company holding the account didnt alert me, either (one of the big ones).

 

[Zigner]

I wouldn't hold out too much hope of getting out of any penalties, etc.

 

[davew9128]

Because i just wasnt aware of it. My accountant has been doing my taxes and saw those accounts for 5 years and didnt say anything and the investment company holding the account didnt alert me, either (one of the big ones).

Well it's not your accountant's responsibility, and quite possibly he/she either didn't recognize it, didn't pay attention to it, or was simply unaware of it. I know with my own clients I don't look at any of their retirement account statements except to see if they contributed to IRAs.

As for the custodian, they DO have a responsibility to inform you of RMD. Don't know the cite off hand, but it's in an IRS regulation that they are to provide that every year.

 

[davew9128]

I wouldn't hold out too much hope of getting out of any penalties, etc.

Not without help. There is a way to do it.

 

[marshall_langman_86]

Not without help. There is a way to do it.

Thanks, Dave. I posted this to another forum and someone there said to just file the 5329 with an explanation and it should be ok. would you not agree? i have a tax lawyer lined up, but if i can save the big fees to them, i'd like to. is the IRS position "they didnt do it on purpose, we'll waive the penalty" or is it "unless the world was ending and kept you from taking the disbursement, you're paying this"?

 

[davew9128]

Thanks, Dave. I posted this to another forum and someone there said to just file the 5329 with an explanation and it should be ok. would you not agree? i have a tax lawyer lined up, but if i can save the big fees to them, i'd like to. is the IRS position "they didnt do it on purpose, we'll waive the penalty" or is it "unless the world was ending and kept you from taking the disbursement, you're paying this"?

I'd agree with the response elsewhere. That said, one of the requirements to abating the penalty is taking steps to remedy the problem. If you've liquidated the account, that would suffice.

 

[LdiJ]

I would still recommend at least a consult with a tax attorney.

 

[marshall_langman_86]

Ive talked to a couple CPAs and 2 tax attorneys. Both CPAs and one tax attorney said they had never done anything like that before. The other attorney said they had and, based on the time they said it would take and their rates, would probably be around 2-4k to get it done. Obviously, if i can save 4k i will, however, losing 4k is alot better than losing half the account.

im just at a loss, because people here and on Turbotax's forum kind of make it seem like its something able to be handled on my own, but then experienced pros are saying theyve never done anything like it (2 of them had to go and even look it up to see what the deal was with it).

 

[davew9128]

im just at a loss, because people here and on Turbotax's forum kind of make it seem like its something able to be handled on my own, but then experienced pros are saying theyve never done anything like it (2 of them had to go and even look it up to see what the deal was with it).

Its not surprising they never dealt with it, because the point of the law is to force distributions to be taken.