Tax Season Q & A

Q:

I plan to do a QCD this year, will I still have to take an RMD?

A:

Maybe, it depends on your QCD and RMDs amounts. Qualified charitable distributions (non-taxable distributions made directly to a qualified charity) do count toward your required minimum distribution. Remember, for QCDs you have to be at least 70½, it must be paid directly to the charity and it cannot exceed $100,000.

Q:

I inherited an IRA from my aunt. She passed away in October 2016 at age 73 and she hadn’t taken her 2016 RMD yet, so I took it in December. Is this RMD reported on her estate tax return or my 2016 tax return?

A:

Your tax return. Year of death RMDs are reported on the recipient’s tax return.

Q:

I am 57, still working and have three IRAs. Can I contribute $6,500 to each one?

A:

No. The IRA contribution limit is an aggregate limit.

Q:

May I deduct losses in my IRA on my 2016 tax return?

A:

Not unless you withdraw the entire balance from all of your IRAs of the same type. Losses and gains are not taken into account on your tax return while your IRA is still open.

Q:

I requested my 2016 RMD on Friday, December 30th but my IRA custodian told me I will get a 1099-R for 2017, not 2016…why?

A:

The distribution year is determined by the processing date, not the request date. Make sure you know your IRA custodian’s deadline for processing RMD requests. Some custodians require them to be submitted by early December to ensure processing is complete by the deadline. There is a 50% IRS penalty for failing to take an RMD by December 31st.

Q:

If I have a Roth IRA, aren’t all of my distributions automatically tax free and penalty free?

A:

No, only qualified Roth distributions are tax and penalty free. There are circumstances where there may be income tax due or an early distribution penalty.

More Updates

IMPORTANT TRUST DEADLINE APPROACHING

For trusts that inherited an IRA in 2019, an important deadline is approaching. The due date to provide required trust documentation to the IRA custodian to ensure that the longest payout period possible is available for the inherited IRA is October 31, 2020. Generally, only individuals who are named on an IRA beneficiary form can

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CRDS AND ROTH CONVERSIONS – ABUSE OF THE RULES?

The coronavirus-related distribution (CRD) rules for Roth conversions have a gaping hole. An “affected person” (as we have defined in previous blogs), is entitled under the CARES Act to withdraw up to $100,000 from their IRA or workplace retirement plan. A CRD avoids the 10% early distribution penalty for those under 59 1/2, can be

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Rolling Over an RMD

Like most people’s lives, the retirement world is upside down. This is made evident by a single statement: “Required minimum distributions (RMDs) can be rolled over.” Yes, that is the new normal—at least for this year. RMDs are considered the first money out of an IRA and workplace plan. Typically, these dollars are ineligible to

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