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Taxpayers who reached age 70½ during 2016 have until April 1st to apply for and begin receiving required minimum distributions (RMDs) from an Individual Retirement Account (IRA) and/or workplace retirement plan.
The April 1st deadline applies to owners of traditional IRAs, such as SEP and SIMPLE IRAS, but not Roth IRAs. It also generally applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans. Some employees who are still working may wait to receive distributions, if their plan allows, until April 1st of the year after they retire.
The April 1st deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by December 31st of each year. So, a taxpayer who turned age 70½ in 2016 and has received the first required distribution by April 1, 2017, must still receive the second RMD by December 31, 2017.
The amount of the distribution is calculated using life expectancy tables matched to the year-end IRA account value of the IRA. Worksheets and life expectancy tables are available in in IRS Publication 590-B “Distributions From Individual Retirement Arrangements”.
It can be costly to miss the deadline for receiving a distribution, as the taxpayer faces a 50 percent tax that would be applied to any required amount not received by the April 1st deadline.
For more information, click here to read through frequently asked questions or contact one of our tax experts at McRuer CPAs.
