Early Withdrawal

Archive for the ‘Penalties’ Category

Question: Deadline for inherited IRA required minimum distribution – was it Dec. 31, 2010?

If a nonspouse inherited an IRA several years ago and took RMDs on schedule but did not withdraw an RMD for 2010 before December 31, 2010, does that constitute a failure to withdraw for the year, triggering the 50% penalty? Or can the inheritor still make the withdrawal for 2010 before April 18, 2011? Inheritor was born after decedent, decedent was well over 70 1/2 at time of death, initial RMD was taken properly and inherited IRA is traditional, not Roth, if any of that makes a difference. Thanks.

Answer: Yes, the deadline for RMDs in any given calendar year is Dec 31. And, failure to satisfy said RMD is 50% of the shortfall. That said, you can still request a waiver of this excise tax. Here’s a link to an explanation you might find helpful.

Good luck!

http://www.ehow.com/how_2165537_irs-penalty-late-rmd-distributions.html

PS – it may be wise to put your RMD on auto-pilot with the IRA custodian so this can’t happen again. It’s a simple form.

IRAKLIS OLYMPIAKOS 2-1 TO PENALTY

Question: I am 61 year old. can I transfer my IRA to roth IRA tax free?

I know there is no penalty if I start withdrawing after 59-1/2
and I have to pay tax on withdrawal of my traditional IRA.
But if I just transfer from traditional IRA to ROTH IRA is it
taxable?

Answer: You can convert all or part of your regular IRA to a Roth IRA. You will pay tax on the amount you convert, but no penalty. I recommend that you look at it each fall and convert part of the IRA based on your other taxable income. You don’t want your conversion to put you in too high of a tax bracket.

By the way, your adjusted gross income must be under $100,000 (excluding the conversion) in order to convert any of the regular into a Roth. That $100,000 limit goes away for 2010.

Jim Kirby, CPA/PFS, CFP, CFS

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