Readers’ financial questions answered
Q: An address listed on my credit report is incorrect. Is there any reason to start a dispute to change it?
A: It’s a good idea to fix the error. The incorrect address could be the result of a “mixed file,” when information of two individuals gets combined into one credit report, or “it could be an indication of an attempt at identity theft,” said Paul Stephens of the Privacy Rights Clearinghouse.
Stephens advises examining all of your credit reports for suspicious activity. You can order a free copy of your credit report from each bureau once a year at annualcreditreport.com.
Q: My brokerage firm didn’t include one of my traditional IRAs when calculating my required minimum distributions over the past three years, so I took out less money than I should have. Is there a way to avoid paying the 50% penalty?
A: You can ask the IRS to waive the penalty. First, calculate the amount you should have withdrawn as your RMD for each of those years and withdraw the money right away.
Then file a separate Form 5329 with the IRS immediately for each year’s RMD you missed. Complete lines 52 and 53 with the amount you should have withdrawn, then write RC, which means “reasonable cause,” and the amount of the penalty you want waived in parentheses on the dotted line next to line 54.
Add a brief note saying that the RMD was omitted by the brokerage and was withdrawn immediately upon discovery, said Ed Slott, publisher of IRAHelp.com. (See instructions for IRS.gov‘s Form 5329.)
You don’t need to send any penalty money unless you hear back from the IRS denying your request for a waiver. Slott said he’s never seen a penalty not waived for someone who withdrew the money as soon as he or she realized the mistake and filed Form 5329 with a reasonable excuse.
© 2019 The Kiplinger Washington Editors. Distributed by Tribune Content Agency.