Don’t Miss These 3 Year-End IRA Deadlines

Monday, December 09, 2019

By Sarah Brenner, JD
IRA Analyst
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It is hard to be believe it is December already. The holiday season is now in full swing. There are gifts to buy and wrap and parties to attend. It’s no wonder that during this time of year many people are not thinking too much about their retirement accounts. Don’t make this mistake! Year-end deadlines for IRAs can sneak up quickly at this time of year. Act now while you still have some time because missing these three IRA deadlines can be costly.

 

  • Take your RMD for 2019

If you have a Traditional IRA (including SEP and SIMPLE IRAs) and you reached age 70½ prior to 2019, you must take your 2019 required minimum distribution (RMD) from your IRA by December 31, 2019. What about those IRA owners who reached age 70½ in 2019? They get a little bit of a break for their first RMD and have until April 1, 2020 to take their 2019 RMD. Beneficiaries of both Traditional and Roth IRAs must also take RMDs from inherited IRAs.

What happens when the December 31 RMD deadline is missed? The penalty for a missed RMD is a hefty 50% of the amount that was not taken.
 

  • Do a 2019 Conversion

Now that recharacterization is no longer an option, converting to a Roth IRA has become an irrevocable election. There are no do-overs. For this reason, it makes sense to do conversions later in the year when you have a clearer idea of the tax consequences. However, if you are considering converting an IRA to a Roth IRA in 2019, time is quickly running out. The deadline for a 2019 conversion is the end of the calendar year. There is a common misconception that a conversion can be done up until the tax-filing deadline. That is NOT the case. There is no such thing as a prior-year conversion.
 

  • Make a 2019 QCD

Are you charitably inclined? If you are 70½ or older and have IRAs, now is the time to think about the potential benefits of a qualified charitable distribution (QCD). For many taxpayers, who are now using the standard deduction and longer itemizing, a QCD is the only way to get a tax break for a charitable contribution.

A QCD for 2019 must be done by December 31, 2019. Your IRA custodian must transfer the funds directly from the IRA to the charity and report the transaction as a distribution on a 2019 Form 1099-R. If you miss the deadline, you can’t do a QCD for 2019. QCDs cannot be done for prior years.

 

 

 

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