List of screwy income tax provisions – #10
IRA Distribution Alert!
Required Minimum Distribution or “RMD rules”
If you turned 70 1/2 this year and have funds in either one IRA or several IRA accounts you need to spend some time studying this really screwy but deadly tax provision.
- Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age.
- However on closer inspection the law really says: You can delay the distribution until the April 1 after the calendar year you reach age 701/2
- If you fail to properly withdraw a RMD the applicable deadline, the amount not withdrawn is taxed at 50%.
- You can take all the funds from the accounts you choose.
- The IRS provides tables which help you calculate your required distribution.
IRA owners are responsible for taking the correct amount of RMDs on time every year from their accounts, and they face stiff penalties for failure to take proper RMDs!