Taxpayers who turn 73 years of age this year will learn all about an interesting IRS Regulation: Required Mandatory Distributions from your taxable Retirement Funds. Most of you 73ers have heard about the tax, but you might want to know some simple facts. These nuances were researched in IRS Publication 590B, not AI. See your tax professionals for complete information, and this is important.
#1- To learn how much you will owe, you can check the three tables in the above Publication. Table 1 is for people who inherited the funds, Table 2 is for people who are married to someone 10 years younger, and Table 3 is for all others.
#2- The Table lists, for each age, your Uniform Lifetime Distribution Period in years. This number is also defined as your Life Expectancy Factor. (A sobering thought).
#3- For 73-year-olds, the number this year is 26.5. You are instructed to divide that percentage into your taxable Retirement Assets to get the amount you owe this year. I first divide 100 by 26.5 to get the percentage I will have to pay. It is 3.77%. This is easier for me to understand.
#4- This amount will be added to your other income and taxed at ordinary income tax rates. You can take the money from one account or from several of your accounts.
#5- For your first year, you have until April 1 of 2027 to pay, and every year thereafter, you will have to pay by December 31st. Note: If you wait to pay this year on April 1st of next year, you will owe two years of tax in 2027.
#6- If you do not pay the tax in a timely fashion, the penalty is 25%. However, if you correct your error within two years, the penalty is 10%.
#7- If you are an inquisitive person, you should check the tables to see the rates for other taxpayers. And see how the rates change. You might get the feeling the IRS is coming after your IRAs or 401Ks, and you might be right. And the IRS is telling you that you can expect to live to 99.5 (26.5 + 73). Paying the damned RMD every year.
#8- For a tool that will assist you in your work, there is a great non-AI website, the AARP Required Minimum Distribution Calculator. AARP is on your side.
#9- Some taxpayers born in 1953: Tim Allen, Cyndi Lauper, Pierce Brosnan, Chaka Kahn, George Brett, Pat Haden, Alfred Molina, Kim Basinger, Pat Benatar, Michael Bolton, Meredith Vieira, and Millions More
#10- And in closing, I will answer two questions before I am asked. Roth type IRAs are not considered in your calculations. And RMDs were required after the IRAs laws were passed in 1974. Have a nice day.
No comments yet.