They don’t call them “required” distributions for nothing. If you reached 70 1/2 years of age in 2014, first, congratulations! Second, today is the deadline for you to take your first required minimum distribution from your (Non-Roth) IRA or SEP, and, if you have retired, from your defined-contribution retirement plan. The rules for the two types of plans are slightly different.
The tax law doesn’t want your retirement plan assets to be growing tax-free forever. That’s why the RMD rules were enacted. You are required to pull an annual taxable amount out based on your remaining life expectancy, determined by IRS tables.
The first required distribution must be taken by April 1 of the year following the year in which you turn 70 1/2. That means you, if you were born after June 30, 1943 and before July 1, 1944. Subsequent distributions have to be taken by December 31. That means if you are taking your first one today, you’ll need to take another one this year.
If you don’t have a spouse 10 years younger than you, you can compute your IRA distribution at this table. If you do, use this table instead. You will need to know your IRA balance as of December 31, 2014.
And if you don’t take your distribution on time? A 50% penalty tax on the amount you should have withdrawn. That would hurt.
This is the first of our 2015 filing season tips. Come back daily through April 15 for more!
For a tax blogger, people like Richard Hatch are wonderful. Hatch, for those who don’t remember, was the winner of the first Survivor and won $1 million. About 300 million individuals worldwide saw Hatch take down the $1 million.
Yet, somehow it didn’t land on his 1040. Things went badly.
People in Iowa get in tax trouble too. St. Charles man sentenced to prison for filing false tax return (Osceola Sentinel-Tribune).
Tax Freedom Day is April 24, The Tax Foundation Announces:
Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income. In 2015, Americans will pay $3.28 trillion in federal taxes and $1.57 trillion in state and local taxes, for a total tax bill of $4.85 trillion, or 31 percent of national income. This year, Tax Freedom Day falls on April 24, or 114 days into the year.
The big day is a day later than it was last year. As state taxes differ, states have different Tax Freedom Days. The first one is Louisiana, which arrives tomorrow. New York and Connecticut have to wait until May 13. Iowa celebrates fittingly on my next day off, April 16.
William Perez, How Saving for Retirement Can Reduce Your Taxes
Jason Dinesen, Iowa Adoption Credit and Deduction. “The Iowa deduction for adoption expenses is also still available, and there is a relationship between the credit and the deduction.”
Robert Wood, Five Ways To Audit Proof Your Tax Return Against The IRS. For example, “Don’t claim flaky deductions.”
Keith Fogg, Impact of Bankruptcy Determination of Tax Liability on Tax Court Case and on Assessment Timing (Procedurally Taxing). “When a taxpayer goes into bankruptcy, a new forum for tax litigation opens up, or potentially opens up, based on section 505 of the Bankruptcy Code.”
TaxProf, The IRS Scandal, Day 692. Today the TaxProf says that Commissioner Koskinen has put all this unpleasantness behind him:
The IRS has fixed its errors, such as improper extra scrutiny of Tea Party groups, and they won’t happen again, the tax agency’s commissioner said Tuesday.
“The changes are so significant throughout the agency that you could hang a sign out at the front of the headquarters saying ‘Under New Management,’” Internal Revenue Service Commissioner John Koskinen said in a speech at the National Press Club in Washington.
Uh-huh. And there were no more Lerner emails, and the Commissioner had made sure he looked very hard for them.
Oh, goody. The Rich Are Finally Paying More in Taxes (Jeremy Scott, Tax Analysts Blog). Oddly, he thinks that’s a good thing. But ultimately, the rich guy isn’t buying. And when you try to smack “the rich,” you are really going after employers.
David Brunori, Transparency: Good for the Tax System, Critical for Good Government (Tax Analysts Blog):
Modern state tax policy has been dominated by cravenness and cronyism. But every once in a while, politicians muster the courage to do the right thing. Several proposals have been advancing in legislatures that will bring more transparency to state fiscal systems. I cannot overstate the importance of these measures.
Cronies and cockroaches prefer darkness.
Howard Gleckman, Is a Consumption Tax Talk Making a Comeback? (TaxVox)
Robert D. Flach emerges from his 1040 cave just long enough to do a little Showboating. He’ll get the reference.
That’s not funny! Accountants Ruin Joke (Caleb Newquist, Going Concern)