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URL:  http://boards.fool.com/my-mom-turned-70-12-last-year-and-had-to-take-18901967.aspx

Subject:  Re: Missed April 1 Date:  4/15/2003  2:38 AM
Author:  pmarti Number:  65046 of 121341

My Mom turned 70 1/2 last year and had to take her first distribution by April 1 this year. She sent the distribution request to the bank that holds herg IRA. They mishandled the paperwork and did not deposit make the withdrawl until April 10. They have given her a letter stating that it was their fault. How would you handle this. Is there any way to avoid the 50% penalty for failing to make the distribution by April 1?

Before I forget, something that sometimes trips people up. You must take a distribution for the year in which you turn 70 1/2. For that first distribution you have some extra time, to April 1 of the following year. The distribution your mother just took was for 2002 (but taxable in 2003). She must take another distribution, for 2003, by December 31.

Now to your question, which you'll find answered in IRS Publication 590, pp 45-47. The official version is that she reports the failure on on Form 5329 for 2002, pays the 50% penalty, and asks for it back. If I were your mother I'd get a check from the bank to cover the penalty, gladly repaying it if the IRS returns the money. If the bank won't cooperate, I'd be out in front of it every day with a sign until they did.

Phil


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