IRS Ruling May Help Retirees

The Internal Revenue Service has issued Revenue Ruling 2002-62 that may help certain taxpayers whose retirement funds are at risk of being depleted by a drop in stock values. The ruling addresses a concern of taxpayers who are required to withdraw a fixed amount from their retirement fund and who may find they are depleting retirement funds more quickly than anticipated due to a drop in the value of their investments.

The ruling applies to taxpayers who have chosen to take distributions of substantially equal periodic payments from tax-deferred retirement savings, and these distributions are to span the life expectancy of the taxpayer. These taxpayers who have elected to withdraw a fixed amount over their life expectancy may now fear a rapid depletion of their retirement savings due to the current drop in the stock market.

This new ruling permits taxpayers who chose either a fixed amortization method or a fixed annuitization method of determining annual payments under the previous rules to make a one-time switch to the required minimum distribution method. Using the required minimum distribution method, the annual payment for each year is determined by dividing the account balance for that year by the number from the chosen life expectancy table for that year. Under this method, the account balance, the number from the chosen life expectancy table and the resulting annual payments are redetermined for each year.

Once a taxpayer chooses to change to the required minimum distribution method of determining the annual withdrawal from a retirement plan, the new method applies for all future years.

This ruling applies for all tax years beginning in 2003 and thereafter and may also be used for calculating retirement distributions in 2002.

You may like these other stories...

IRS audits less than 1 percent of big partnershipsAccording to an April 17 report from the Government Accountability Office (GAO), the IRS audits fewer than 1 percent of large business partnerships, Stephen Ohlemacher of the...
Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.