We (my wife and I) had a Required Minimum Distribution Issue (RMD) that was supposedly resolved. We have a letter from the IRS stating that the waiver was granted and that we owe NOTHING for the tax year in question (2017). Unfortunately, somehow a penalty due was sent to the IRS collections department, and this is apparently difficult to fix. See previous SE question if you want the longer story. RMD Penalty Waiver

The worst part, the amount that they are demanding does not make sense. In round numbers, we neglected to take a $2k distribution for 2017, the penalty (if not waived) would be $1k (50%). They are demanding $3k, and they won't tell us how they arrived at this amount.

We also had RMD issues for two other tax years, but these seem to be completely resolved. All the IRS letters reference the RMD, the $3k cannot be for something else. Our tax returns are very simple, we use the standard deduction.

My accountant and I called several different IRS phone numbers and we could not fix the issue via the phone. The best that they would do is give me a 120 day extension. They told us to write a letter (my accountant did this for us).

Because of the Covid-19 crisis, all IRS reviews are delayed. They already told us that the review would be delayed 60 days (this was about 60 days ago). So, they may not review our case before the 120 days runs out in a few days.

Interest and further penalties are not accruing during the extension. But if we miss paying by this deadline they will be tacked on. Paying the $3k now seems like a poor option because that would be admitting that they are right.

Besides asking for the accountants advice (he will likely suggest that we ask for another extension), is there anything else that we should do?

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.