IRS Enforcing IRA Required Minimum Withdrawals

If you've hit your 70th birthday-or know someone who has-make sure you're taking the proper amount from your IRAs or risk a potential 50 percent tax on money that should have been withdrawn, the Wall Street Journal reported.

The rules in question involve “required minimum distributions” from individual retirement accounts, which are required once the IRA's holder reaches the age of 70_. The amount that has to be withdrawn is based on life expectancy. (To gauge life expectancy, go to IRS Publication 590, Individual Retirement Arrangements, available at www.irs.gov/pub/irs-pdf/p590.pdf.

The IRS, which has not strictly enforced the minimum distributions because they were hard to track, is not taking a stricter line. In the past, it was more “a case of self-policing, more than anything else,” Stephen P. Vitale, a certified financial planner and senior vice president at J.B. Hanauer & Co., a financial-services firm in Parsippany, NJ, told the Journal.

Usually it took an audit or other investigation to unveil a failure to withdraw the funds and the IRS tended to waive the rigorous penalty, Ed Slott, an accountant in Rockville Centre, N.Y., and publisher of Ed Slott's IRA Advisor, told the Journal.

This year, however, institutions that hold IRAs-including mutual-fund companies, banks, insurers, brokers, etc.-are required to let the IRS know annually whether required withdrawals were made during the year. The IRS will be notified each spring, at the same time the IRA trustee sends a reminded to make the required withdrawal, the Journal reported.

If you haven't already done so, the time has come to take the required withdrawals since the penalty is harsh-if you are required to take $50,000 and don't do it, you could end up paying $25,000 in taxes.

“IRAs are one of the largest sources of tax revenue to be collected as people start aging,” Slott told the Journal. “Now that so much notification [about required withdrawals] is going on, I don't see the IRS being so lenient about penalties anymore.”

You may like these other stories...

Cybersecurity is no longer the domain of an organization's IT staff. It's moved to the boardroom, and in a big way. Accountants and financial managers may have been thinking it's just the province of the tech...
Boehner addresses GOP priorities ahead of midterm electionsHouse Speaker John Boehner (R-OH) on Thursday delivered what amounted to closing arguments ahead of the November elections, laying out a list of Republican...
Former DOJ Tax Division head Kathryn Keneally joining DLA Piper in New YorkGlobal law firm DLA Piper announced on Thursday that Kathryn Keneally, the former head of the US Justice Department Tax Division, is joining the firm...

Already a member? log in here.

Upcoming CPE Webinars

Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.