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Author: IRJay One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120799  
Subject: Missed April 1 Date: 4/14/2003 9:46 PM
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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?

IRJay
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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65046 of 120799
Subject: Re: Missed April 1 Date: 4/15/2003 2:38 AM
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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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Author: sheldick One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65064 of 120799
Subject: Re: Missed April 1 Date: 4/16/2003 1:23 PM
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... She must take another distribution, for 2003, by December 31.

one additional thought.
give the custodian written instructions to make the minimum required distribution, but rather than making it 31 december (ur max date), make at earlier, so that you will have time to receive some confirmation before 31 dec. this way u can get back to the custoduan if they don't close the loop in time.
most custodians will let you state that u want all subsequent distributions made by a given date - this way u dont' have to tell them each time. also, you might want to consider having them withhold taxes. in most cases u can stipulate no withholding or a specified percentage. if u have trouble keeping records, u might make this percentage your marginal tax rate. if u withdraw in december u'r not giving the IRS too much up front. Of course,if u get a refund, u'r already paying IRS too much up front - and no sense in having more tax withheld.

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Author: IRJay One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65071 of 120799
Subject: Re: Missed April 1 Date: 4/16/2003 10:23 PM
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Phil & Sheldick,

Thanks for the advice. Phil mentioned PUB 590, so i went there and verified your answers. Ya'll done good!!! Thanks again.


IRJay

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