The IRS is reminding retirees born before July 1, 1948, that they must take distributions from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31.
The payments, called required minimum distributions (RMDs), are normally made by the end of the year. Those who reached age 70½ during 2018 are covered by a special rule that allows them to wait until April 1, 2019, to take their first RMDs.
This means that those born after June 30, 1947, and before July 1, 1948, are eligible for this special rule for 2018. If they wait until early 2019 to take that first RMD (up until April 1, 2019), it can be counted toward their 2018 RMD, but is still taxable in 2019.
The special April 1 deadline only applies to the RMD for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, for example, a taxpayer who turned 70½ in 2017 (born after June 30, 1946, and before July 1, 1947) and received the first RMD (for 2017) on April 1, 2018, must still receive a second RMD (for 2018) by Dec. 31, 2018.
Types of retirement plans requiring RMDs
The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs. Roth IRAs don’t require distributions while the original owner is alive. RMDs also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.
An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2018 RMD, this amount is on the 2017 Form 5498 normally issued to the owner during January 2018.
An IRA owner must calculate the RMD separately for each IRA they own, but can withdraw the total amount from one or more of the IRAs. However, RMDs required from workplace retirement plans (like 401(k), 403(b), and 457(b) plans) have to be taken separately from each of those plan accounts.
If you have questions about your RMD or how this deadline may impact you, contact your tax professional or reach out to one of our experts today!