Over 70 1/2? Check into the required minimum distributions…
September 27, 2014
As the final quarter of the year approaches, more season taxpayers need to keep a careful eye on their required minimum distributions (RMDs) for the year, as a stiff penalty applies to those who don’t withdraw enough from their retirement accounts. This article explains the rules that apply and offers a strategy for those older taxpayers who would be interested in using the qualified charitable contribution deduction this year, should it be retroactively reinstated by Congress.
Take the RMD or pay a big penalty. Taxpayers must start taking annual RMDs from their traditional IRAs (and 401k accounts) by April 1 following the year in which they attain age 70 1/2. Failure to withdraw the annual RMD could expose the taxpayer to a penalty tax equal to 50% of the excess of the amount that should have been withdrawn over the amount that actually was withdrawn.
The amount of each RMD is calculated separately for each IRA. However, the RMD amounts for the separate IRAs may be totaled and the aggregated RMD amount may be paid out from any one or more of the IRA accounts.
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