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Required Minimum Distributions from Retirement Accounts

| November 01, 2019
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Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 70 ½, regardless of whether he or she is retired.

If an account owner fails to make a Required Minimum Distribution (RMD), fails to withdraw the full amount of the RMD,or fails to withdraw the RMD by the applicable deadline, the amount not withdrawn is taxed at 50%. That makes this one of the highest penalties imposed by the IRS that doesn't involve fraud.  According to the IRS, the penalty may be waived if the account owner establishes that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. In order to qualify for this relief, you must file Form 5329 and attach a letter of explanation.

IRS Website-FAQ RMD's

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions#8

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