RMD age 70 1/2
clients birthdate is 10-16-1942, which means he turned 701/2 on 4-16-2013. He just turned 71.
Does he have to take the rmd by 12-31-13?
or
can he take the rmd this year out by 4-1-2014 and then 2014 out by 12-31-2014?
Thank you,
Douglas
Permalink Submitted by tomd37 on Tue, 2013-10-22 21:07
My understanding is his RBD is April 1st of the year after he attains age 70.5. So his RBD is April 1, 2014 and that would be his RMD for 2013. By choosing such he must take his 2014 RMD by December 31, 2014 thus giving him two taxable distributions in the same tax year. Such distribution could impact taxability of social security benefits and possibly make more benefits taxable. To answer your questions, my understanding is the does not have to take the first RMD by December 31, 2013 and he can take his 2013 RMD by April 1, 2014 and his 2014 RMD by December 31, 2014. Tom D.
Permalink Submitted by Alan - IRA critic on Tue, 2013-10-22 23:27
Tom is correct. However, deferring the first RMD to the second year does not always increase taxation of SS benefits. It depends on the where the taxpayer falls relative to the min and the max 85% of benefits being included in AGI. For example, if by taking equal RMDs the taxpayer would owe taxes on 70% of his benefits each year, it could work out that by deferring the first RMD or a large part of it to the second year, no SS benefits would be included the first year and 100% the second year making for a lower two year total. To owe the lowest possible tax, this client should experiment with a tax program such as taxcaster (on line) with different portions of the first RMD taken to see what the expected total tax would be. Of course, this flexibility only exists in the year client reaches 70.5. Taxcaster may not be useful for complex tax situations.