If you turned 70 ½ last year and did not take a required minimum distribution, make sure you take one by April 1, 2019, and your second distribution (for 2019) by December 31, 2019. If you don’t take the required minimum distribution you could be subject to a 50% penalty on the amount you should have withdrawn but didn’t. While the IRS is somewhat generous in waiving the penalty, why take a chance?
If you turn 70 ½ this year, make sure you take your required minimum distribution this year. If you wait until next year you will take 2 distributions and pay a higher income tax.
An alternative: If you don’t need your IRA income, consider directing a distribution to your favorite charity. The law still allows you to do so if you meet all the following requirements:
- You are at least 70 ½.
- You direct the custodian of your IRA to distribute an amount directly to a public charity that is exempt under section 501(c)(3). Most public charities will qualify.
- The check doesn’t go through your hands and doesn’t have your name on it. If your name is on the check, you will pay income tax on the withdrawal.
- The distribution must come from a traditional IRA or a Roth IRA. You cannot make the distribution from a 401k or other type of pension plan.
- You can direct a distribution up to $100,000 to the charity.
If you do this, you do not report any income on the amount going to charity and take no deduction. The amount going to charity also satisfies your required minimum distribution requirement, so it has no effect on your tax return. You still get a chance to help your favorite charity.
Planning now for your required minimum distribution can save taxes and avoid penalties and later problems. Income tax planning can be an important part of your overall estate plan. Call us if you have questions, problems or would like additional advice.