Even if you didn’t take advantage of the opportunity to skip your RMD in 2009, you may want to keep reading. Failing to take the appropriate minimum distribution from tax-deferred retirement plans carries one of the highest tax penalties in the tax code.
What Is an RMD?
Tax-deferred retirement vehicles allow participants to defer paying current taxes on their contributions and earnings until they begin taking withdrawals, generally in retirement. To ensure that investors d
on’t postpone their income taxes indefinitely, the tax code stipulates that they must begin taking RMDs from traditional IRAs and qualified retirement plans after reaching age 70½ or face a tax penalty equal to 50% of the amount that should have been withdrawn.
The amount that must be withdrawn in 2010 is calculated based on the account owner’s life expectancy (generally based on an IRS uniform lifetime table) and the account balance(s) on December 31, 2009.
One Time Only
Congress suspended RMDs in 2009 to give investors time to recover from losses they may have experienced in 2008. However, Congress did not extend the suspension of RMDs beyond the 2009 calendar year.
Contact Susan S. Lewis for more Naperville Tax Preparation strategies.
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.
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