Generally, required minimum distribution (RMD) amounts must be withdrawn by December 31st of the year for which they are due. An exception applies for the year you reach age 70½, allowing the RMD for that year to be taken as late as April 1st of the following year. If you’d prefer to stay on the safe side though, you can take your first RMD before December 31st of that year.
Distributions from traditional, rollover, SEP, and Simple IRAs create a taxable event that is reported on a 1099 at year’s end.
The new tax law has been impacting the benefit of making personal contributions to charities. However, having an RMD made payable directly to a charity from the IRA custodian could be a way to continue to reap the preferential tax treatment of charitable giving. Speak with one of our advisors and consult your tax-advisor for more information regarding this.
If you miss an RMD deadline, you could owe the IRS a 50% excess accumulation penalty on the RMD shortfall in addition to still having to withdraw your regular RMD amount. The IRS will waive the penalty if the deadline was missed due to “reasonable cause.”
IRA owners who miss their RMD deadlines must file IRS Form 5329 to either report and pay the penalty, or request the waiver if eligible.
If you have an IRA and would like to ensure that you have taken care of your RMD requirement, please give us a call at 860-430-1009. We can ensure that your RMD for this year is being withdrawn, as well as set up a systematic option for you so that your RMD will be withdrawn at the same time each year.
Reed Financial Planning Services, LLC is here to help you and your family with your planning needs. Reach out to us today if we can be of any assistance to you.
Partially written by Elaine Floyd, CFP®
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License #: 4748934 Reprint Licensee: Scott Reed
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