As the leaves continue to turn and the holiday season approaches, tax time is probably the last thing most of us are thinking about right now. However, New Year’s Eve will be here before we know it. It may therefore benefit some self-directed investors to begin contemplating required minimum distributions (RMDs) among other tax-related matters. As written in the Internal Revenue Code, account holders who have made tax-deferred contributions to a Traditional IRA (or another such pre-tax plan) must begin repayment of those taxes once they reach a certain age. Accordingly, clients who meet the following criteria will be subject to RMDs:
To calculate your RMD, you’ll need your end-of-year balance from the previous year and a numerical factor that corresponds with your age (other factors may dictate the calculation as well). In their simplest forms, RMDs can be initiated by contacting our office to request the cash withdrawal of your required minimum. The distributed funds will be reported as income and indicated on Form 1099-R, which you will receive before the tax filing deadline. Here are some other considerations:
At New Direction Trust Company, we take pride in the prompt and accurate completion of these transactions. We understand that RMDs may seem like a burden, but we’re happy to help with every step of the process. Please don’t hesitate to give us a call if you have any questions or would like to begin the RMD process sooner rather than later (highly recommended).