IRS Red Flags: Signs Your RMD May Have a Problem
The IRS matches Form 1099-R distributions against prior-year retirement account balances to verify RMD compliance. Warning signs that you may have an RMD problem: receiving an IRS CP2000 notice about distributions, failing to receive Form 1099-R from a custodian, or realizing in December you have not taken your distribution yet.
RMD red flags and immediate response actions
| Red Flag | What It Signals | Immediate Action |
|---|---|---|
| No 1099-R received but had IRA in prior year | Possible missed distribution or account closure | Contact custodian immediately |
| IRS CP2000 notice about RMDs | IRS believes you may have under-withdrawn | Verify calculation; consult CPA; file 5329 if needed |
| December 20 and no RMD taken | Risk of missing deadline in 11 days | Contact custodian immediately for expedited distribution |
| Custodian changed and RMD unclear | Transfer may have created confusion about balance | Get Dec 31 balance from all custodians |
| Inherited IRA and no distributions taken | 10-year clock running; risk of year-10 miss | Calculate 10-year plan and begin distributions |
Advisor Red Flags in RMD Planning
Certain advisor recommendations in the context of RMDs are red flags for potential conflicts of interest or inappropriate advice. An advisor who recommends purchasing an annuity with IRA funds to minimize RMDs, rolling an IRA into a very complex product, or taking excessively large distributions without tax planning should be questioned carefully.
An annuity inside a traditional IRA does not eliminate RMDs — you still must take minimum distributions from the annuity value. Annuity fees of 2-3%/year on top of ordinary income tax on RMDs creates a very expensive combination. Be extremely cautious about any recommendation to purchase an annuity inside a traditional IRA.
Advisor RMD red flags and appropriate alternatives
| Advisor Red Flag | Why It Is Concerning | Better Alternative |
|---|---|---|
| Annuity inside IRA for RMD avoidance | Does not eliminate RMDs; adds 2-3% annual fees | Roth conversion or QCDs instead |
| Complex trust structure for simple RMD | Adds cost and complexity without meaningful benefit | Simple IRA beneficiary designation + QCDs |
| Rollover to private equity IRA | Illiquid and complex — RMD timing impossible to plan | Liquid publicly traded investments only |
| Taking maximum possible RMD for more income | Creates bracket problems and IRMAA | Only take what is needed; use QCDs for excess |
Self-Check: 5 Questions to Verify Your RMD Status
Run through this annual self-check each November: (1) Do you know all your traditional IRA account balances as of last December 31? (2) Have you calculated your RMD for each? (3) Have you taken the required amount or are you on track to? (4) Have you directed any charitable giving through QCDs? (5) Have you updated your beneficiary designations recently?
- Verify all IRA accounts are identified and December 31 balances recorded
- Calculate total RMD from all accounts using IRS table for your current age
- Confirm total distributions to date meet or will meet the requirement by December 31
- Verify QCDs went directly from IRA to charity not to you first
- Review beneficiary designations — especially after any life change in the past year
Verify Your RMD Calculation Is Correct
Enter your account balance and age to confirm your RMD amount and check for any red flags.