Once you reach age 70 ½ you must take a required minimum distribution (RMD) from your individual retirement account (IRA). The IRS allows you to delay the first distribution until April 1st of the year following the year you turn 70 ½. RMDs for years after age 70 ½ must be taken by the end of the calendar year. Therefore, if you elect to defer the RMD for the year you attain age 70 ½, you will have two RMDs in the year you attain age 71 ½.

If you inherit an IRA and the RMD was not taken by the original account holder in the year of death, you as the beneficiary are still required to take the annual RMD of the decedent.

If you fail to take your RMD by the required date, it is deemed an excess accumulation. Any excess accumulation is any amount of an RMD that is not timely distributed. Any excess accumulation in a tax year is subject to a 50% penalty. Once you discover the RMD was not taken, you should arrange to take the distribution immediately. The IRS may waive the 50% penalty if you can establish the excess accumulation was due to reasonable error and steps are or have been taken to remedy it. A tax professional can help you complete the appropriate forms and a letter of explanation. The penalty will only be due if the waiver is denied by the IRS.

Contact your KS-LLP professional to learn more about Required Minimum Distributions and how to handle a missed RMD.