Certain RMDs Must Be Taken by New Years Eve

By ASPPA Net Staff • October 29, 2015 • 0 Comments
There’s not much time left in 2015, and that applies to more than just the calendar. It also applies to certain required minimum distributions (RMDs). The IRS issued a reminder in IR-2015-122 on Oct. 29 that those born before July 1, 1945 generally must receive payments from their IRAs by Dec. 31.

The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

The RMD for 2015 is based on an individual’s expectancy on Dec. 31, 2015 and account balance on Dec. 31, 2014. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets for making necessary computations are available online on the IRS website as well as in the appendices to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

For most taxpayers, the RMD is based on Table III (Uniform Lifetime Table) in IRS Publication 590-B. A separate table, Table II, applies to a taxpayer whose spouse is more than 10 years younger and is the taxpayer’s only beneficiary.
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 2015 RMD, this amount is on the 2014 Form 5498 normally issued to the owner during January 2015.

Some Exceptions

Though the RMD rules are mandatory for all owners of traditional, SEP and SIMPLE 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. 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.

First-time RMD recipients — this year, those born after June 30, 1944 and before July 1, 1945 and who attained age 70½ during 2015 — may delay their RMD until as late as April 1, 2016. Though payments made to these individuals in early 2016 can be counted toward their 2015 RMD, they are still taxable in 2016.

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. So, for example, a taxpayer who turned 70½ in 2014 (born after June 30, 1943 and before July 1, 1944) and received the first RMD (for 2014) on April 1, 2015 must still receive a second RMD (for 2015) by Dec. 31, 2015.