April 1 Deadline for Receiving Retirement Account RMDs
MARCH MADNESS. That phrase could mean many things to many people. For some, it’s about college basketball. For the tax attorneys at TIMONEY KNOX, it’s about the approach of April 15th and working with our clients to complete income tax and gift tax returns before that notorious date.
But as your brackets get busted and April looms, it is important to remember that there is another IRS deadline coming before Tax Day. April 1 is the deadline for most taxpayers who turned 70 ½ during the prior year to begin receiving required minimum distributions (RMDs) from their qualified retirement accounts.
This deadline applies to traditional IRAs, and to most participants in 401(k), 403(b) and 457 plans. It does not apply to Roth IRAs. Importantly, the April 1 deadline is effectively an automatic extension that the IRS gives to taxpayers for their first year (and only their first year) of RMDs. For subsequent years, the required minimum distributions must be made by Dec. 31.
Attention to these deadlines is crucial because the IRS assesses stiff penalties for failure to take RMDs. Failure to follow RMD rules can result in a 50% excise tax on amounts not distributed.
There are some exceptions to this April 1 deadline. Taxpayers who are still working may be able to wait until April 1 of the year after they retire to start receiving distributions, if their plan allows this, as well as some employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987. To be certain, check with your employer or provider.
The IRS urges taxpayers to plan now for any RMDs during 2015.