Missed RMD from Inherited IRA (BDA) but haven't filed taxes yet - what options do I have?

This happens more often than you'd think! You have a couple of options, and the good news is that since you haven't filed yet, you're in a better position. First, you should immediately take the RMD that you missed. Even though it's late, taking it now shows good faith effort to comply. Next, yes, Form 5329 is what you need. It's the "Additional Taxes on Qualified Plans and Other Tax-Favored Accounts" form. There's a section where you can request a waiver of the penalty due to reasonable cause. The IRS has been fairly understanding about waiving penalties for missed RMDs when there's a reasonable explanation. Make sure to include a letter explaining why you missed the RMD (honest mistake, confusion about the rules, etc.) and that you've now taken the distribution as soon as you realized the error. The normal penalty is indeed 25% of the amount not taken, but with proper documentation and a good explanation, there's a decent chance the IRS will waive it.

I went through almost exactly this situation last year with a missed RMD on my dad's IRA that I inherited. I was so confused by all the paperwork and deadlines. I found this tool called taxr.ai (https://taxr.ai) that really helped me figure out exactly what forms to file and how to write that explanation letter for the waiver. The tool basically analyzed my situation and gave me a step-by-step guide for handling the missed RMD. It even helped me draft that letter explaining why I missed it in a way that the IRS accepted. The best part was that it showed me examples of successful waiver requests so I knew what kind of language to use.

Wanted to update on my situation since I posted above. I ended up trying taxr.ai after all and it was actually super helpful! Their system walked me through exactly what constitutes "reasonable cause" for my specific situation. I took their advice about immediately withdrawing the missed amount and documenting everything. The step-by-step guidance for filling out Form 5329 was really clear - I would have definitely messed that up on my own. Just got confirmation yesterday that my penalty waiver was accepted! Such a relief not having to pay that 25% penalty on my missed RMD.

If you're struggling to get help from your financial institution about this, try using Claimyr (https://claimyr.com) to get through to the IRS directly. I waited on hold with my bank for HOURS trying to get proper guidance about my missed RMD last year, and getting nowhere. With Claimyr, I got connected to an actual IRS agent who explained exactly what I needed to do in my situation. They basically hold your place in the phone queue so you don't have to listen to that awful hold music for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with gave me specific instructions for my situation that were way more helpful than what my bank told me. Definitely worth it if you want to be 100% sure you're handling this correctly.

Just wanted to admit I was wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway since I was desperate to talk to someone at the IRS about my own tax situation (not RMD related). I was shocked when I actually got connected to an IRS representative in about 10 minutes (after their system had been waiting for over an hour). The agent was super helpful and answered all my questions about penalty abatement. For what it's worth, the agent I spoke with confirmed that for missed RMDs, they do typically approve the penalty waiver requests when it's a first-time mistake and you take the distribution promptly after discovering the error. Just make sure you document everything carefully.

Something that hasn't been mentioned yet - if you inherited this IRA recently (like after January 1, 2020), make sure you understand the SECURE Act rules. The distribution requirements changed pretty dramatically and a lot of people get confused. The traditional "stretch IRA" is mostly gone now except for certain eligible designated beneficiaries (spouses, disabled individuals, etc.). Most non-spouse beneficiaries have to empty the account within 10 years now. Just making sure you're calculating your RMD correctly in the first place!

Does anyone use a specific tax software that's good for handling these RMD issues? I've been using TurboTax but it didn't prompt me about my RMDs at all!