Late IRA Distribution
If you don't take your IRA distribution on time, it's expensive. The penalty is 50% of the withdrawal you should have taken.
IRS wants you to take IRA distributions on time so they can get their hands on the tax dollars. Your first withdrawal is required by April 1 after you turn age 70.5. But its a good idea to take your first distribution in the year you turn age 70.5 or else the following year, you need to take 2 distributions (one for turning age 70.5 and the next one for turning age 71).
This withdrawal, known as a required minimum distribution, or RMD, must come out of retirement savings where taxes have been deferred. This includes several popular IRAs, such as traditional; simplified employee pension, or SEP; and SIMPLE accounts -- as well as certain employer-sponsored plans. You can however lump accounts of the same type together. So if you have 3 IRAs that total 100,000, you can calculate your IRA distribution based on the $100,000 and then withdraw that required amount from any of the IRA accounts you desire.
IRS is somewhat lenient if you miss your IRA distribution for good cause. If you can convince the IRS that your forgotten distribution was due to "reasonable error" and that you're taking steps to rectify the situation, the agency could waive the penalty. In that case, file Form 5329 (part VIII), go ahead and pay the excess accumulation tax and attach a letter of explanation. If the IRS agrees that you shouldn't be penalized, it will refund the excess tax.
If you have just one retirement account, the custodian will normally send you a form and do the calculation for you and send a check. But if you have more than one account, you need your accountant or financial advisor to calculate what to withdrawal or you can do it yourself.
Note that IRS provides three IRA distribution tables with the numbers you need. These are in the back of publication 590 (free at www.irs.gov). One table is for everyone (the uniform table) unless
a. you have a spouse more than 10 years younger than you
b. you are the beneficiary of an IRA (an inherited IRA)
There is a separate table for the people who qualify for a and b above.
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