Required Minimum distribution
Client has Multiple Sclerosis so is in very poor health. She has her first RMD this year of $ 24,211.15 from a total of two IRA accounts which we manage. Client just informed me that she has an additional $ 12,000.00 in former 401K plan (that she forgot) which still exists at former employer.
Her question: If she takes a full distribution of the $ 12,000.00 at the former 401K plan, will this count toward the
$ 24,211.15 RMD? Her balance in the former plan last 12/31/2015 is not known at the present time.
Thanks,
John O
Permalink Submitted by Alan - IRA critic on Tue, 2016-03-29 22:14
No. A distribution from the 401k will only count toward the RMD of that plan. IRA RMDs must be taken separately from IRA accounts in any combination. She would reduce distributions and taxable income if she only took the 401k RMD amount from the 401k, and then did a direct rollover of the 401k balance to her IRA. This would reduce her taxable income by over 11,500. The IRA RMDs would not increase as a result of the rollover until next year. As for that 401k RMD, the plan must know the RMD amount and the 12/31/2015 value to calculate it.
Permalink Submitted by John L. Ostner on Wed, 2016-03-30 15:21
Thanks for yoiur speedy reply and in the process, the client also finally revealed to me that she has an IRA index annuity with another firm so we’ll have to find out those values also! Finding these other assets is like peeling an onion!
Permalink Submitted by Ben Meyer on Sat, 2016-04-02 17:49
Why not request the client to obtain an IRS transcript of all forms 1099 filed with the IRS? File form 4506-T to request a transcript of information returns by checking box 8. Indicate tax years 2014 and 2015. Year 2014 would be complete, but year 2015 may not yet be completed for furnishing transcripts. That should allow a good assessment of all current accounts. But bear in mind that financial institutions don’t need to file form 1099 when the total paid is less than $10 in any calendar year.