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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3183
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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This is in regards to possible insufficient distributions

Customer Question

This is in regards ***** ***** insufficient distributions from IRAs in past years by my father now deceased.
He was a widower and had a grantor trust which included holdings of two IRAs. At the time of his death the trust became irrevocable. I am the executor of his estate and the trustee of the trust. He filed his own income taxes - no outside assistance.
In reviewing his past income tax filings I've become concerned that he was not taking enough distributions from his IRAs to satisfy the RMD requirement. I'm certain this was the case for 2010. Unfortunately, I do not have the a complete set of FMVs for tax years 2009, 2011 & 2012, but interpolating between the FMVs I have, I'm reasonably certain the distributions were insufficient. FYI, I am aware that there is a 50% tax on the difference between the RMD and actual distributions as well as interest charges.
I have no idea why my father did not take sufficient RMDs. It is impossible to get an answer to that question with the information I have. I've contacted both IRA companies requesting Dec 31 FMVs for the "blank" years from 2005 to present. One company has indicated they will provide me with the FMVs within 1-2 weeks. The other company will not without a court order.
Questions:
I assume I must file a Form 5329 for the tax year 2010 for which I know what the FMV basis was as well as the actual distributions and the RMD. Please confirm.
Should I also notify the IRS that I suspect insufficient distributions were taken in tax years 2009, 2011, 2012? If so, do I simply write them a letter? I assume they will have copies of the FMVs and can (and will) determine the amount owed.
Any other guidance on how to deal with this situation will be much appreciated.
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.
Welcome to Just Answer. My name is ***** ***** it will be my pleasure to assist you with your tax question today.
If and when you receive information which supports your belief that your father did not take the required RMDs, you would amend the tax returns for those years using Form 1040X and including a copy of Form 5329. You do not include a copy of the originally filed tax return.
You cannot amend or alter a tax return by sending a letter to the IRS.
http://www.irs.gov/pub/irs-pdf/f1040x.pdf
http://www.irs.gov/pub/irs-pdf/i1040x.pdf
You would use the specific Form 1040X for each tax year you are amending.
Amended returns cannot be efiled. They must be mailed in to the IRS. Mail each amended return separately in its own envelope and use certified mail, return receipt requested.
Please let me know if you require further information or clarification.
Thank you and best regards,
Barb
Expert:  Barbara replied 1 year ago.
Just following up with you to see if you have any other questions or concerns. If so, please come back to me here or in the other question thread at your convenience, and I will be happy to assist you.
If you have all of the information you need, please take a moment to rate either answer because that is the only way I receive credit for answering you and alerts Just Answer to compensate me.
Best regards,
Barb

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