What are the rules and reporting requirements for a rollover of a required minimum distribution (RMD)?

By Denise Appleby AAA
A:

An RMD may be transferred between IRAs, but it may not be rolled over once distributed. If the RMD amount is rolled over to an IRA, it will be treated as an ineligible rollover contribution and will therefore be subject to a 6% excise penalty for each year it remains in the IRA.

The RMD is deemed to have been distributed when the amount leaves the first IRA.

The reporting requirements for the rollover of an RMD to an IRA and its subsequent removal are as follows:

  • The first custodian must report the RMD amount as a regular distribution on IRS Form 1099-R. No special designation is required on Form 1099-R to distinguish the amount as an RMD; instead, it is reported much like any other regular distribution from the IRA. The IRA owner should include the amount in income the year that this 1099-R is issued. In other words, the IRA owner must treat the amount as if it were not rolled over to another IRA.
  • The second custodian (the custodian of the IRA to which the amount was rolled over) reports the ineligible rollover on IRS Form 5498. However, because the amount representing the RMD is not rollover eligible, it is treated as an excess contribution and the IRA owner must, therefore, remove the amount as a return of excess contribution from the IRA by tax-filing deadline, including extensions for the year the amount was rolled to the IRA.
  • The second custodian reports the return of excess distribution on IRS Form 1099-R. This amount is reported as a nontaxable distribution, which prevents the amount from being taxed twice. However, any earnings attributed to the ineligible rollover amount must be removed and will be taxable.

To read more about IRA rollovers, read Strategic Ways To Distribute Your RMD, Exceptions To The 60-Day Rollover Rule and Avoiding RMD Pitfalls.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. Can I purchase mutual funds for my IRA?

    Learn how to invest your IRA assets in mutual funds. Discover a few of the different types of mutual funds available for ...
  2. How do Pay As You Go pension plans work?

    Learn how pay-as-you-go pension plans are different than fully funded pension plans and why some government plans are running ...
  3. Who is eligible for a Teacher Retirement?

    Learn about the retirement option, the Teacher Retirement System, offered to teachers and other public school employees, ...
  4. What's the difference between a financial advisor and a financial planner?

    Seeking professional advice from a financial advisor may involve asking for financial help from a certified financial planner, ...
RELATED TERMS
  1. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  2. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  3. Gold IRA

    Definition of Gold IRA
  4. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  5. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  6. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...

You May Also Like

Related Articles
  1. You need to be patient, diligent and perseverant to be successful at investing, but more importantly, you need to start early.
    Investing Basics

    Why You Should Start Investing Early? ...

  2. Many of us fantasize about winning a big lottery jackpot. Let’s say that actually happened? What would you do with the money? How would you manage it?
    Professionals

    Tips For Managing A Cash Windfall

  3. Retirement

    Planning Ahead for 2015's Tax Law Changes

  4. Even though inflation currently seems tame, it's still the worst enemy of retirees. Here are some tips to reduce its impact.
    Professionals

    Tips For Managing Inflation In Retirement

  5. Retirement

    5 Crucial Tips For Your Retirement Income ...

Trading Center