Don’t Forget to Take Your RMDs

December 01, 2014 by Karen Reed, EA
Required Minimum Distributions

When you reach a certain age the government requires that you withdraw money every year from many of your pre-tax retirement accounts, such as traditional IRAs and 401ks. When you are 70 ½ or older, you need to “take” your “required minimum distributions,” otherwise known as “RMDs,” each year before December 31st. Think of it as a vitamin that you need to take once a year to keep yourself healthy (and out of trouble with the IRS) with regard to your retirement accounts.
 

The general idea behind a retirement account is to allow your money to grow tax free until such time as you are perhaps in a lower tax bracket than you were when you were working. The RMD ensures that taxes are eventually paid on the funds.
 

If you reached 70 ½ this year, a special rule applies, which allows you to take the RMD by April first of next year. If you choose this option you will be required to take two RMDs in 2015, the first RMD would be for 2014 and the second would be for 2015.

Tags: 401k, IRA, retirement

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Karen Reed, EA

 

During her years as an audit representative for TaxAudit, Karen successfully defended the company’s members throughout the entire federal and state audit processes, handled cases assigned to US Tax Court, and developed procedures to make the audit process easier for taxpayers. Karen attributes a great deal of her tax acumen to the six tax seasons she spent as a return reviewer, analyzing thousands of returns. Responding in writing to questions from taxpayers, she became familiar with the common mistakes self-preparers make. Karen was previously the manager of the Tax Education and Research Department and the Director of Communications at TaxAudit. Her tax advice has been featured in U.S. News and World Report, the Los Angeles Times, the Chicago Tribune, and other publications.


 

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