My client turned 82 in 2021. He does not have an IRA presently but had sufficient wages in 2020, wants to open one by 4/15/21 and take the deduction for the contribution against 2020 taxes. My question is, will the contribution amount, being treated as made in 2020, be considered as the balance as of 12/31/20 and thus be the number used to figure a RMD for 2021?
Thank you for the clarification DMx. What a gift from the IRS – current tax bene, potential retirement savers credit and no RMD! I hope they don’t close up that loophool.
Note that if he deducts a TIRA contribution, the Secure Act includes an offset to any current or future QCDs he makes. If he is making QCDs, this is a problem. Also, the savers credit will generally not work for people taking RMDs, as the past couple RMDs would have to be reported as reductions for purposes of calculating the credit.
This is a brand new and only TIRA. No prior vehicle to make QCD or RMDs. I determined the amount of the contribution to get all of his withholding back and end up with $0 tax liability for 2020 thanks to the savers credit. As he is 82, this may be a one and done opportunity. First RMD will occur in 2022.
Permalink Submitted by David Mertz on Tue, 2021-02-16 04:14
No. The December 31, 2020 traditional IRA balance of $0 does not get adjusted for contributions for 2020 made in 2021. His traditional IRA RMD for 2021 will still be zero.