When do I have to Take My My First Retirement Plan Deduction?
After you turn 70.5, you typically start receiving the required minimum distributions (RMD) from your retirement plans, individual retirement accounts (IRAs), and from employer-provided retirement plans. If you turned 70.5 in the year 2017, we want to remind you that APRIL 1st is the deadline to take the first of your required retirement plan distributions.
What Employer-Sponsored Plans are Included
The answer is simple: ALL employer-sponsored retirement plans are included in this Sunday, April 1st deadline. This includes:
- Profit-sharing plans
- 401(k) plans
- 403(b) plans
- 457(b) plans.
The RMD rules also apply to traditional IRAs and IRA-based plans such as:
- and SIMPLE IRAs
The only exclusion to these IRA and IRA-based plans is ROTH IRAs.
The April 1 RMD deadline is applicable only for the first distribution. For all subsequent years (after the year in which you turn 70.5), including the year in which recipients were paid the first RMD by April 1, the RMD must be made by Dec. 31. According to the IRS,
…a taxpayer who turned 70½ in 2017 and receives the first required distribution (for 2017) on April 1, 2018, for example, must still receive the second RMD by Dec. 31, 2018.
IRA owners can use a qualified charitable distribution (QCD) paid directly from an IRA to an eligible charity to meet part or all of their RMD obligation. Available only to IRA owners age 70½ or older, the maximum annual exclusion for QCDs is $100,000.
What is the Penalty for Not Taking the Deduction?
By not taking your RMD by April 1st, the year following your age reaching 70.5, you may be subject to a 50% tax on any of the remaining required distribution.
We want to ensure our clients are adequately prepared with the knowledge needed to guarantee they are receiving the most of their hard-earned money. If you have questions as it relates to your retirement distributions, reach out to your CPA or contact us today!