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The Annual minimum distributions must first begin the year taxpayer turns age 701/5

Annual minimum distributions begins at the age 701/2. If the taxpayer made nondeductible contributions in prior years, the preparer would need to use Form 8606, nondeductible IRA, to work out the percentage of the distribution that is nontaxable.

April 1 of the following year in which the taxpayer reaches age 701/2 the taxpayer must begin receiving distribution. The RMD for any year after the year which the taxpayer turns 70 1/2 must be made by December 31 of that year. If the distributions are less than RMD for the year, the taxpayer may have to pay a 50% excise tax for that year on the amount not distributed as required.

Now due to the pandemic, on March 27, 2020, the Coronavirus Aid, and Economic Security Act also known as the CARES act, is temporarily waived the (RMDs) for the 2020 calendar year. Due to the economic impact of COVID-19, majority retirement plans have decreased in value since December 31, 2019. Taking a distribution in 2020 require selling assets at a lower rate and paying more income tax. The CARES Act allows taxpayers flexibility in receiving their RMD and to reap the benefit in retaining tax-deferred savings until at least 2021.

Under the CAREA Act, If Taxpayer has already taken their RMD for 2020, they are not allowed to make repayment of the RMD. The Taxpayer can take full advantage of the 60-day period which allows for RMDs to be rolled over into a new IRA. Whenever the Taxpayer rolls over the RMD it allows the taxpayer to avoid paying taxes on the RMD.

To learn more about the new tax law regarding to RMD contact your Tax accountant or contact us at Direct Point Accountant Firm.


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