I am completing form 5329 for my 2024 tax return because I did not receive the required minimum distributions from an inherited IRA in 2024. I have corrected this within the "correction window" time period by taking the distributions this month. I am requesting a waiver of penalty. Is the "shortfall" for purposes of requesting the waiver the amount of the RMDs that I did not receive in 2024, or is it the amount of the penalty I am asking to be waived?

When you are completing Form 5329 to request a waiver of the penalty for not taking the required minimum distributions (RMDs) from an inherited IRA, the "shortfall" refers to the amount of the RMDs that you did not receive in 2024, not the penalty amount itself. Here's how you should approach it: 1. **Calculate the Shortfall**: Determine the total amount of RMDs you were supposed to take in 2024 but did not. This is the "shortfall" amount you will report on Form 5329. 2. **Requesting a Waiver**: In Part IX of Form 5329, you will report the shortfall amount. To request a waiver of the penalty, you should attach a statement explaining why you did not take the RMDs on time and how you have corrected the situation (by taking the distributions within the correction window). Mention that you are requesting a waiver of the 50% excise tax due to reasonable cause. 3. **Reasonable Cause**: The IRS considers waiving the penalty if you can demonstrate that the shortfall was due to reasonable cause and that you have taken steps to remedy the situation. Be sure to provide a clear and concise explanation in your statement. By focusing on the shortfall amount and providing a thorough explanation, you increase your chances of having the penalty waived. Remember, the IRS will review your request and decide based on the information you provide.

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