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Remedying IRA Contribution and Distribution Errors

Correcting Overcontributions, Form 5329 Penalty Calculations and Waivers, Self-Certification for Late Rollovers

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, November 14, 2024

Recorded event now available

or call 1-800-926-7926

This webinar will explain how to expedite the correction of errors that taxpayers frequently make when contributing and distributing money to and from IRAs. The panelist will review common missteps, including overcontributions, missed required minimum distributions (RMDs) and rollover deadlines, prohibited transactions, appropriate steps to remedy errors, and advice for mitigating related penalties.

Description

The complexity of IRA rules leads to countless opportunities for mistakes. Unfortunately, the noncompliance penalties surrounding retirement contributions and distributions are severe. For 2024, the contribution limits are $7,000 for taxpayers under age 50 and $8,000 for those 50 or older. Overcontributing can lead to a six percent excess penalty that is charged annually until the taxpayer withdraws the excess contribution. If not corrected, the penalty could exceed the amount of the contribution.

Common distribution errors include missed RMDs. Generally speaking, a taxpayer must begin withdrawals from SIMPLE IRAs, SEPs, and other retirement plans at age 72 or 73 if you turn 72 after Dec. 31, 2022. The SECURE 2.0 Act graciously reduced the penalties on overlooked RMDs from 50 percent to 25 percent and, in some instances, to 10 percent.

There are steps taxpayers, and their advisers can take to correct past errors and minimize or negate the stiff penalties surrounding retirement plan errors. For example, Form 5329, Additional Taxes on Qualified Plans (including IRAs), is used to report required excise penalties but can also be used to request a waiver for excise charges on missed RMDs. Additionally, the IRS offers a self-certification process for taxpayers who miss the 60-day rollover window for retirement contributions. Individual taxpayers who contribute to retirement plans and their advisers must understand the relief available to eliminate or mitigate the severe penalties assessed for failing to meet the required IRA requirements for distributions and contributions.

Listen as Larry Pon, CPA/PFS, CFP, EA, USTCP, AEP at Pon & Associates, provides examples of correcting common errors made when contributing and withdrawing money from retirement accounts.

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Outline

  1. IRA contributions and withdrawals: introduction
  2. SECURE Act's impact on IRAs
  3. Common errors and corrections
    1. Overcontributing
    2. Missed rollover deadlines
    3. Missed RMDs
      1. Age 72/73
      2. Inherited IRAs
    4. Penalties
    5. Penalty relief

Benefits

The panelist will cover these and other key issues:

  • Steps to remedy and report overcontributions to IRAs
  • IRS self-certification process for missed rollover deadlines
  • Preparing Form 5329 to ask for a penalty waiver
  • The impact of SECURE Act 2.0 on IRA contributions and distributions

Faculty

Pon, Larry
Larry Pon, CPA/PFS, CFP, EA, USTCP, AEP
CPA/PFS, CFP, EA, USTCP, AEP
Pon & Associates

Mr. Pon has been in practice since 1986 providing comprehensive accounting, tax, payroll, and business advisory...  |  Read More

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