Do I make estimated tax payments on IRA payout?
Today 9:30 PM
Q. I will be turning 72 this year and understand that I should take a Required Minimum Distribution (RMD) this year. If I delay the RMD until December, am I required to make quarterly federal estimated tax payments throughout the year or can I direct the financial institution to deduct income tax in December? Trying to do it right
A. Happy early birthday!
Required Minimum Distributions (RMDs) must begin by April 1 following the year a taxpayer turns 72.
So in your situation, you would not be required to receive your first RMD until April 1, 2022, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.
After rules changes, how will my IRA distribution work this year?
Updated 9:30 PM;
Q. I turned 71 in October 2020. I have not yet taken a Required Minimum Distribution (RMD) from my IRA accounts because of last year’s changes from COVID-19. So for this year, what age do I use on the IRS worksheet to determine my RMD? Must I take it by April 1, and do I only have to take one this year? Retired
A. These are great questions.
Required Minimum Distributions (RMDS) have changed significantly in the past few years, and the elimination of the RMD in 2020 because of COVID just adds to the confusion.
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While we await proposed regulations under Code section 401(a)(9) to reflect the significant changes made to the required minimum distribution (“RMD”) rules under the SECURE Act, the
2020 IRS Publication 590-B for IRA distributions gives us a look into the current IRS thinking. It also has a nice summary of the disaster relief provisions that apply to IRAs.
A brief summary of the RMD changes reflected in the IRS Publication that applies to IRAs, and which generally also may be applied to defined contribution plans, is set forth below.
IRS Reveals Retirement Plan Compliance Initiatives
The agency plans to examine worker classifications, RMDs in large DB plans and participant loans, as well as do a compliance check about partial plan termination and partial vesting, among other things.
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The IRS Tax Exempt & Government Entities Division (TE/GE) has a released a new 2021 Program Letter to update its compliance initiatives for its fiscal year.
The agency says it will continue to pursue its compliance program described in the 2020 Program Letter. The letters for both years are available on a webpage the IRS will use to share information about other initiatives at the end of each quarter during the fiscal year, as well as findings from recently completed actions.
16 Ways to Withdraw Money From Your 401k Without Penalty
By Jim Blankenship
When hard times befall you, you may wonder if there is a way withdraw money from your 401k plan. In some cases you can get to the funds for a hardship withdrawal, but if you’re under age 59½ you will likely owe the 10% early withdrawal penalty. The term 401k is used throughout this article, but these options apply to all qualified plans, including 403b, 457, etc.. These rules are not for IRA withdrawals (although some are similar) – see the article at this link for 19 Ways to Withdraw IRA Funds Without Penalty.