Know What the IRS Wants You To Do
  • December 18, 2015
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Every year, many retirees receive retirement funds that go into their IRA, SIMPLE IRA, SEP IRA, or retirement plan accounts. The funds that go into these accounts can stay unused until the retirees reach the age of 70½. Once they reach this age, however, they are required to withdraw a minimum amount every year, known as the “Required Minimum Distribution”, or RMD for short. Let’s take a closer look at what changes for those who cross this age threshold.

RMD and Applicable Tax Liability

Though the amount withdrawn is included in your taxable income, it may be partially or fully exempted, if a part of it was taxed earlier, or if the amount qualifies to be received tax-free. For instance, qualified distributions from designated Roth accounts may be tax-free.

Date for Receiving RMD

Typically, the last date for withdrawing RMD is December 3; however, those who have recently turned 70½ years and are first time recipients of these payments may receive their first RMD as late as 1st April of the following year.

For example, taxpayers who were born after June 30, 1944, and before July 1, 1945, will turn 70½ in 2015. Ideally, they should receive the RMD in the same year; however, as an exception for first-time RMD recipients, these taxpayers may receive their first RMD as late as April 1, 2016.

What if You Fail to Take RMD?

Taxpayers who take no distributions or withdraw less than the required RMD amount must pay 50% excise tax on the amount remaining in the account. In such cases, taxpayers must file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.

What is Form 5498?

Each year, the custodian of a taxpayer’s account, usually the bank or a financial institution, mails a copy of Form 5498 to both, the taxpayers and the IRS. The form reports a taxpayer’s total annual contribution to their IRA accounts. It also identifies the type of IRS account that the taxpayer holds, such as traditional IRA, SIMPLE IRA, Roth IRA or SEP IRA.


Though the IRA custodian or retirement plan administrator calculates the RMD, taxpayer or IRA account holders should also calculate the amount of RMD. If it is inaccurate calculated, the RMD amount may be penalized. Account holders may request that the IRS waives the penalty. The burden of proof falls on the account holder to prove the fact that the shortfall was due to a reasonable error and that they are taking necessary steps to fix it.

The Law Offices of Nick Nemeth offers professional tax help. If you are struggling with IRS debt, let Nick offer his guidance.

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What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
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I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
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Eddie WaltEddie Walt
19:44 12 Jul 22
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