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IRS reminder: Apr. 1 is key date for older taxpayers with IRAs and qualified plan accounts

In a news release, IRS has reminded taxpayers who turned 70 1/2 during 2013 that, in most cases, they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans (i.e., 401(k), 403(b), and 457 plans) by Apr. 1, 2014.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by December 31. So, for example, a taxpayer who turned 70 1/2 in 2013 and receives the first required payment on Apr. 1, 2014 must still receive the second RMD by Dec. 31, 2014.

Affected taxpayers who turned 70 1/2 during 2013 must figure the RMD for the first year using their life expectancy on Dec. 31, 2013 and their account balance on Dec. 31, 2012 (reported by the trustee to the IRA owner on Form 5498). Most taxpayers use Table III (Uniform Lifetime) of Publication 590 to figure their RMD. 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.

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. 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.

For a Practice Alert on this deadline and the mechanics of computing the RMD, how to deal with multiple IRAs or multiple qualified plans, tax planning tips, as well as the consequences of delaying taking the first year’s RMD until the second distribution year, see Weekly Alert ¶  16  03/20/2014.

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