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Old 03-06-2016, 11:53 AM
 
Location: Central Massachusetts
4,800 posts, read 4,855,118 times
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Quote:
Originally Posted by AnnaLee2 View Post
My husband turns 70 in April which means he turns 70 1/2 in October. Technically I could take his RMD in 2017 before April 1. I will not wait until 2017 to take that first RMD though because if I did, it would be on my 2017 taxes. The 2017 RMD would also be on my 2017 taxes. So I will take his 1st RMD before the end of 2016 to avoid paying taxes on two RMDs in 1 year. Once that first year is over, I just owe the yearly RMD to be withdrawn sometime during the tax year.


This is the way I understand the rules. Anything wrong?
You are correct and you have until April 1 2018 for that one but best to get it out before. Never wait until the last moment.
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Old 03-06-2016, 12:16 PM
 
Location: Sherman Oaks, CA
6,239 posts, read 15,455,705 times
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Golfingduo, your advice below is incorrect.

For someone who turns 70 1/2 in October 2016, they have until April 1, 2017 to take the first RMD. The second RMD (calculated on the 12/31/16 balance) needs to be taken by December 31, 2017. This is the only situation in which you'd have two RMDs (taxable events) in the same year.

They do not have until April 1, 2018.

Quote:
Originally Posted by golfingduo View Post
You are correct and you have until April 1 2018 for that one but best to get it
out before. Never wait until the last moment.
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Old 03-06-2016, 02:35 PM
 
Location: Florida -
8,767 posts, read 10,859,665 times
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There seem to be slightly conflicting answers, but, I think I understand. To avoid a double tax hit, I will need to take my first RMD sometime in the year of my 70th birthday and the second the following year. If I delay the first one for the 6-months until the start of the following year, I will then need to take a second RMD by 12/31 of the same year, which would produce a double tax hit.
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Old 03-06-2016, 03:25 PM
 
210 posts, read 151,223 times
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Quote:
Originally Posted by jghorton View Post
There seem to be slightly conflicting answers, but, I think I understand. To avoid a double tax hit, I will need to take my first RMD sometime in the year of my 70th birthday and the second the following year. If I delay the first one for the 6-months until the start of the following year, I will then need to take a second RMD by 12/31 of the same year, which would produce a double tax hit.

Change that 70th birthday to six months after my 70th birthday and I agree. The problem is that if your 70 1/2 occurs in a different year than your 70, the first RMD YEAR is the year of your 70th birthday plus six months. So if your birthday is, say, August 3 of 2016, then your 70th and 1/2 is on February 3, 2017 and your first payment is due after February 3, 2017. This is the only RMD due in 2017. Just saying it's the year of six months after your 70th birthday.
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Old 03-06-2016, 03:26 PM
 
6,309 posts, read 4,755,565 times
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Quote:
Originally Posted by jghorton View Post
There seem to be slightly conflicting answers, but, I think I understand. To avoid a double tax hit, I will need to take my first RMD sometime in the year of my 70th birthday and the second the following year. If I delay the first one for the 6-months until the start of the following year, I will then need to take a second RMD by 12/31 of the same year, which would produce a double tax hit.
Nope, still wrong. You should take the RMD in the year you turn 70 1/2. You can wait until April of the following year but that puts two distributions in the same tax year.
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Old 03-06-2016, 04:56 PM
 
Location: Native Floridian, USA
4,907 posts, read 6,124,428 times
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Quote:
Originally Posted by Southern man View Post
From the IRS FAQ

When must I receive my required minimum distribution from my IRA?

You must take your first required minimum distribution for the year in which you turn age 70. However, the first payment can be delayed until April 1 of the year following the year in which you turn 70. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year.

You need to be careful and not take two distributions the same year.
Quote:
Originally Posted by reed303 View Post
No, the "take it by April 1" allowance is only good for your very 1st RMD. All later RMDs must be done by Dec 31 of the 2nd and future years. Again, that would result in you having to report the total of 2 RMDs in the same tax year, possibly resulting in a higher tax bracket, etc. (and a bigger % of any SS benefits being taxed.)

Why this is allowed is a mystery to me. It seems to create more issues than it solves. You have a whole year, at least, to figure out when to actually make that 1st RMD withdrawal.
Quote:
Originally Posted by AnnaLee2 View Post
My husband turns 70 in April which means he turns 70 1/2 in October. Technically I could take his RMD in 2017 before April 1. I will not wait until 2017 to take that first RMD though because if I did, it would be on my 2017 taxes. The 2017 RMD would also be on my 2017 taxes. So I will take his 1st RMD before the end of 2016 to avoid paying taxes on two RMDs in 1 year. Once that first year is over, I just owe the yearly RMD to be withdrawn sometime during the tax year.


This is the way I understand the rules. Anything wrong?
Quote:
Originally Posted by SandyCo View Post
Golfingduo, your advice below is incorrect.

For someone who turns 70 1/2 in October 2016, they have until April 1, 2017 to take the first RMD. The second RMD (calculated on the 12/31/16 balance) needs to be taken by December 31, 2017. This is the only situation in which you'd have two RMDs (taxable events) in the same year.

They do not have until April 1, 2018.
These are correct about the first year RMD's. I took 2 in one year but since 2 were after tax dollars, it will not be bad.


One thing I did encounter though was, I was withdrawing from 3 different brokerage houses. Vanguard had no problem processing 2 in one year. Franklin Templeton had a little trouble getting it straight about the 2 deductions in one year. Mass. Mutual completely dropped the ball and failed to take my 2nd RMD in the proper year and now we are scrambling to keep the IRS off my back. They couldn't backdate a check. They have agreed to pay the fines but these things take on a life of its own with the IRS. I know. I am a tax preparer.


They sent me a form to process with my tax return, for the wrong year, as well as, a letter of explanation that had me participating in the wrong pension plan. They agreed that they had all of the proper paperwork from me to handle the transaction properly. It just didn't happen. Oh, well, was their attitude.


Pay close attention to how it is being handled if you go this route.
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Old 03-07-2016, 06:18 AM
 
Location: Sherman Oaks, CA
6,239 posts, read 15,455,705 times
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I agree that you need to be careful if you do take two RMDs in one year, because most banks and brokerages don't have a system set up to track this. I work in the financial services industry, and I set up a spreadsheet a few years ago. Anyone who takes their first RMD in the following year (meaning they need to take two total that year) has a comment like "needs to take 2016 RMD by 12/31) in red. Our system just shows a distribution was made; it can't differentiate between years.

By the way, I set up that spreadsheet mostly because I would call clients in October to say, "Okay, time to take your RMD" and they'd say, "Oh, just do what you did last year" as if I could remember!!! My spreadsheet has notes on what happened the year before, if they chose to withhold taxes, and anything special. I'm trying to get everyone set up automatically (it recalculates the RMD automatically every year, and sends the distribution monthly or annually, whatever the client wants) as much as possible, because we're dealing over 120 people now! The list seems to get longer every year. 2017 is going to be crazy; these are the babies who were born after World War II.

Not everyone is as diligent; the responsibility does ultimately fall on the client to get it done. I just try to do everything I can to make that happen.
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Old 03-07-2016, 08:20 AM
 
Location: Central Massachusetts
4,800 posts, read 4,855,118 times
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I know this is probably going to sound like I am dumb but.... isn't it that you can take the RMD as a combined amount if you take it in monthly checks? Also I totally understand that folks have multiple accounts while accumulating but wouldn't it be wiser to transfer your balances to your best performing account for ease of determining the RMD.


For us I know it is easier. Years ago I closed my IRA by transferring it into my 401k. My wife has only one account as well. My plan is to determine my RMD based on the year end value when I set up my withdrawals for the upcoming year and divide it by 12.
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Old 03-07-2016, 08:55 AM
 
Location: Florida -
8,767 posts, read 10,859,665 times
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Quote:
Originally Posted by AnnaLee2 View Post
Change that 70th birthday to six months after my 70th birthday and I agree. The problem is that if your 70 1/2 occurs in a different year than your 70, the first RMD YEAR is the year of your 70th birthday plus six months. So if your birthday is, say, August 3 of 2016, then your 70th and 1/2 is on February 3, 2017 and your first payment is due after February 3, 2017. This is the only RMD due in 2017. Just saying it's the year of six months after your 70th birthday.

That is the clearest so far! -- This whole 6-month thing seems to create unnecessary confusion ... typical of the tax system.

Another question: My wife is already into her 2nd RMD. When mine start, I'll want to combine the total required RMD's from various accounts (1 hers and 2 mine) into an annual number to ensure we are cumulatively withdrawing the required amount. Has anyone found an approach or process to simplify that type of situation?
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Old 03-07-2016, 10:17 AM
 
1,209 posts, read 1,078,937 times
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Quote:
Originally Posted by AnnaLee2 View Post
Change that 70th birthday to six months after my 70th birthday and I agree. The problem is that if your 70 1/2 occurs in a different year than your 70, the first RMD YEAR is the year of your 70th birthday plus six months. So if your birthday is, say, August 3 of 2016, then your 70th and 1/2 is on February 3, 2017 and your first payment is due after February 3, 2017. This is the only RMD due in 2017. Just saying it's the year of six months after your 70th birthday.
Thank you! That's almost exactly my scenario - just a different day in August. I'm just going to go ahead and do it in 2017 and get the process started. Why complicate it by doubling up? I appreciate the clear explanation.
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