Key Reminders for Tax Pros: Helping Clients Meet Year-End RMD Deadlines
As the year draws to a close, the IRS reminds retirees aged 73 and older to take their Required Minimum Distributions (RMDs) from retirement accounts by December 31 to avoid penalties.
Key Points for Tax Professionals
RMD Age Threshold: Clients who turned 73 in 2024 are required to take their first RMD by April 1, 2025. However, delaying the first RMD means two distributions in one year, potentially increasing taxable income.
Account Types: RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored retirement plans like 401(k)s. Roth IRAs are exempt during the original owner's lifetime.
Tax Implications: Withdrawals are taxed as ordinary income. Failure to withdraw the RMD can result in a penalty of 50% of the amount not taken.
Calculation: The RMD amount is determined by dividing the prior year-end account balance by a life expectancy factor from IRS tables.
Action Steps
Review Client Accounts: Identify clients aged 73 and older with applicable retirement accounts.
Calculate RMDs: Ensure accurate RMD calculations for each client, considering all relevant accounts.
Client Communication: Inform clients of their RMD obligations and the importance of timely withdrawals to avoid penalties.
Coordinate Withdrawals: Assist clients in scheduling distributions before the December 31 deadline.
Tax Planning: Advise clients on the tax implications of RMDs and strategies to manage taxable income effectively.
Staying proactive in managing RMDs ensures compliance and helps clients avoid unnecessary penalties. For detailed information, refer to the full press release for links to IRS guidelines on RMDs.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.
