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’Tis the Season…for RMDs, IRS Reminds

New Year’s Eve is the deadline for most 2014 required minimum distributions to be made. The IRS issued that reminder Dec. 8 in news release IR-2014-112. Generally, RMDs from 401(k), 403(b) and 457 plans as well as IRAs must be made by Dec. 31.

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 on Form 5498 in Box 12b. For a 2014 RMD, this amount was on the 2013 Form 5498 normally issued to the owner during January 2014.

The RMD for 2014 is based on the taxpayer’s life expectancy on Dec. 31, 2014, and their account balance on Dec. 31, 2013.

Exceptions

Though the RMD rules are mandatory for all owners of traditional IRAs and participants in workplace retirement plans, some people in workplace plans can wait longer to receive their RMDs. Usually, employees who are still working can — if their plan allows — wait until April 1 of the year after they retire to start receiving these distributions.

In addition, under a special rule, first-year recipients of these payments, those who reached age 70½ during 2014, may wait until as late as April 1, 2015 to receive their first RMDs. This covers those born after June 30, 1943 and before July 1, 1944. Though payments made to these taxpayers in early 2015 can be counted toward their 2014 RMD, they are still taxable in 2015.

The special April 1 deadline only applies to the RMD for the first year. For all subsequent years, the RMD must be made by Dec. 31. Thus, a taxpayer who turned 70½ in 2013 (born after June 30, 1942 and before July 1, 1943) and received the first required payment on April 1, 2014 must still receive the second RMD by Dec. 31, 2014.

Also, the RMD rule does not apply to Roth IRAs while the original owner is alive.