The Internal Revenue Service (IRS) today reminds taxpayers who are age 70½ during 2014 in most cases begin to receive required minimum distributions (RMDs) for Wednesday April 1, 2015 to their accounts of individual retirement arrangement (IRA, for its acronym in English) and workplace retirement plans. If you forget to take an RMD, there could be extra tax imposed. Further, there will definitely be additional apperwork that will need to be submitted to the IRS.
Required Minimum Distribution Deadlines
The deadline of April 1 applies to owners of traditional IRAs but Roth IRAs. Typically, participants also applies in several occupational retirement plans, including 401 (k), 403 (b) and 457.
The deadline of April 1 applies only to the required distribution for the first year. In all subsequent years, the RMD was taken before December 31. However, if a taxpayer turned 70½ in 2014 and received the first required the first of April 2015 payment, you will receive the second RMD on December 31, 2015.
Who must take an RMD?
Affected taxpayers who met 70½ during 2014 should be calculated based on life expectancy from his birthday in 2014 and account balances as of December 31, 2013. The trustee’s RMD, reports the value of the account end of the year the IRA owner in the Form 5498 in box 5. Spreadsheets and life expectancy tables to make this calculation can be found in the appendices of Publication 590-B
Calculating RMD Amounts on Retirement Accounts
Most taxpayers use the Table III (Uniform Lifetime) to calculate your RMD. So for a taxpayer who turned 70½ in 2014, and served 71 years before the end of the year; in this case the first required distribution will be based on a life expectancy of 26.5 years. In a separate table, Table II , applies for a married taxpayer whose spouse is 10 years younger and is the sole beneficiary of the taxpayer.
April 1 RMD Deadline
Although the deadline of April 1 is compulsory for all owners of traditional IRAs and most plan participants occupational retirement; some people with occupational pension plans can wait longer to receive your RMD. Generally, those who are still working can, if the plan permits, wait until April 1 of the year after retiring to start receiving these distributions. See Tax on Excess Accumulation in Publication 575. Employees of public schools and certain tax-exempt organizations with accumulations of 403 (b) before 1987 should consult with your employer, plan administrator or provider to see how to treat these accumulated accounts.
Planning for Retirement Distributions in Retirement
The IRS encourages taxpayers to begin planning now for any distribution required during 2015. The IRA trustee must report the amount of the RMD to the owner or offering the calculation of the IRA.Often, the trustee shows the amount of the RMD in box 12b of Form 5498. For RMD 2015, this amount will be in the 2014 Form 5498 that is normally released in January 2015.