Taxpayers aged 70 1/2 and over must take withdrawals from their traditional IRAs by December 31 or pay a penalty.
The penalty is equal to fifty percent (50%) of the amount that should have been withdrawn but was not.
Unlike other types of distributions, this required distribution is not eligible for roll-over treatment into another IRA to avoid the distribution and resulting income tax.
The required distribution may be computed for you by the trustee of the IRA or your money manager or investment advisor. If not, you will have to compute it yourself.
To compute the required distribution:
- Divide the balance as of December 31st of last year for each IRA by the appropriate factor for your age. The factor may be obtained from IRS Publication 590.
- Sum the amounts computed in step 1. This is the required distribution.
Even though the required distribution is computed using all of your IRAs, the actual withdrawal can be taken from any IRA, or multiple IRAs, that you choose.
IRS Circular 230 Disclosure
Pursuant to IRS Regulations, we inform you that any tax advice provided or implied on this post (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.
While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.