Are You 70 1/2?
If you have retirement or IRA accounts and you are approaching age 70 1/2, you must be careful to make sure to take your required minimum distributions (RMD) and April 1 can be a key deadline. Holders of these accounts are normally required to start taking RMDs in the year they turn 70 1/2, however, there is an exception to this rule. For those farmers or other taxpayers who turn 70 1/2 in 2015, they can either take their RMD in 2015 or wait take it by April 1, 2016. However, if they wait until 2016, they then are required to also take their 2016 RMD in the same year, therefore, you bunch up two RMDs into one year.
We normally recommend taking the distribution in the year you reach 70 1/2, but there may be times when it is better to postpone such as when you have a large amount of income in 2015 and expect to be in a much lower tax bracket in 2016. Every situation is different so it is wise to review this with your tax advisor to determine the best option.
The penalty for not taking your RMD can be drastic since it is 50% of the RMD for that year. Make sure you don’t miss the deadline if you turn 70 1/2 in 2015. You only have one week to comply.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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