WASHINGTON — The Internal
Revenue Service today reminded taxpayers who turned age 70½ during 2016
that, in most cases, they must start receiving required minimum
distributions (RMDs) from Individual Retirement Accounts (IRAs) and
workplace retirement plans by Saturday, April 1, 2017.
The April 1 deadline
applies to owners of traditional (including SEP and SIMPLE) IRAs but not
Roth IRAs. It also typically applies to participants in various
workplace retirement plans, including 401(k), 403(b) and 457(b) plans.
The April 1 deadline only
applies to the required distribution for the first year. For all
subsequent years, the RMD must be made by Dec. 31. A taxpayer who turned
70½ in 2016 (born after June 30, 1945 and before July 1, 1946) and
receives the first required distribution (for 2016) on April 1, 2017,
for example, must still receive the second RMD by Dec. 31, 2017.
Affected taxpayers who
turned 70½ during 2016 must figure the RMD for the first year using the
life expectancy as of their birthday in 2016 and their account balance
on Dec. 31, 2015. The trustee reports the year-end account value to the
IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B.
Most taxpayers use Table
III (Uniform Lifetime) to figure their RMD. For a taxpayer who reached
age 70½ in 2016 and turned 71 before the end of the year, for example,
the first required distribution would be based on a distribution period
of 26.5 years. A separate table, Table II, applies to a taxpayer married
to a spouse who is more than 10 years younger and is the taxpayer’s
only beneficiary. Both tables can be found in the appendices to
Publication 590-B.
Though the April 1 deadline
is mandatory for all owners of traditional IRAs and most participants
in workplace retirement plans, some people with workplace plans can wait
longer to receive their RMD. Employees who are still working usually
can, if their plan allows, wait until April 1 of the year after they
retire to start receiving these distributions. See Tax on Excess
Accumulation in Publication 575.
Employees of public schools and certain tax-exempt organizations with
403(b) plan accruals before 1987 should check with their employer, plan
administrator or provider to see how to treat these accruals.
The IRS encourages
taxpayers to begin planning now for any distributions required during
2017. 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 in Box 12b on Form 5498. For a 2017 RMD, this amount
would be on the 2016 Form 5498 that is normally issued in January 2017.
IRA owners can use a qualified charitable distribution
(QCD) paid directly from an IRA to an eligible charity to meet part or
all of their RMD obligation. Available only to IRA owners age 70½ or
older, the maximum annual exclusion for QCDs is $100,000. For details,
see the QCD discussion in Publication 590-B.
A 50 percent tax normally applies to any required amounts not received by the April 1 deadline. Report this tax on Form 5329 Part IX. For details, see the instructions for Part IX of this form.
More information on RMDs, including answers to frequently asked questions, can be found on IRS.gov.
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