Save time with our cheat sheets, fact sheets, checklists & books!

November 11, 2010

Incorrect Market Value for RMDs Will Cause Penalties

Share on print
Print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
If You Had an ‘Outstanding’ Transaction for Last Year, Your IRA Custodian’s RMD Calculation May be Incorrect. 
Your IRA custodian must either proactively provide you with a calculation of your  required minimum distribution (RMD) amount, or send you an offer to calculate it upon request, providing they held your account as at December 31 of the previous year. However, your custodian is not responsible for determining if adjustments should be made to your FMV, which means you must make that determination for yourself. The following are some additions that you must make to your FMV for December 31 of last year, for purposes of calculating your RMD for this year.
  • Outstanding Recharacterizations: If you completed a Roth conversion last year and recharacterized all or a part of it this year, the recharacterized amount must be added to your FMV for December 31 of last year
  • Outstanding rollovers:If you took a distribution from your IRA and rolled over the amount within 60-days, but with the distribution having occurred last year and the rollover occurring this year,  the rollover contribution amount must be added to your FMV for December 31 of last year
  • Outstanding transfers: If you started a trustee-to-trustee transfer between IRAs and the assets left your IRA before close of business on December 31 and were credited to your receiving IRA after December 31, the transferred amount  must be added to your FMV for December 31 of last year
If these adjustments are not made to your FMV, your calculated RMD amount will be less than it should be, and could result in you owing the IRS an excess accumulation penalty of 50% of the shortfall. 
Consult with  your tax or financial advisor for assistance with calculating your RMD.

Tip by Denise Appleby

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print
More

Keep Learning

SEP IRA Quick Reference Guide- 2011

SEP IRA Quick Reference Guide- 2011 SEP IRA Features and Benefits Eligible Employer Age Requirement Service  and compensation requirement Salary deferral allowed Maximum contributions allowed

Be among the first to know when

IRA Rules
Change