Questions and Answers
One of our IRA owners passed away in 2007 before taking his required minimum distribution. We contacted the beneficiaries last year but they've just responded recently, too late to take the required 2007 distribution. What happens now?
The deadline to remove the RMD was December 31, 2007. Because that did not happen, each beneficiary is subject to the 50 percent excess-accumulation penalty tax on his/her share of the undistributed 2007 RMD. Each beneficiary reports the undistributed amount, and the associated penalty, by filing IRS Form 5329, Additional Taxes on Qualified Plans (Including IRAs), with his/her federal income tax return for the year of the excess accumulation. He/she may also attach a letter of explanation, including the reason for the excess accumulation and a description of they steps they have taken to remedy the situation. The IRS may waive the penalty. Seeking guidance from an income tax professional is recommended.
(Posted: 02/13/2008)
