Top 12 RMD Tax Facts to Know

Related: Business Expense Tax Deductions: 12 Facts to Know

Required minimum distributions (RMDs) are a fact of life for retirees. But if your clients pull out more than the required amount from the IRA, for example, they could trigger unnecessary taxes. And while Congress allowed people to suspend taking RMDs for 2020 as part of COVID-19 relief, the requirements are back in place for 2021 and beyond.

Are you advising your clients correctly when it comes to RMDs associated with retirement accounts? In the gallery above are 12 important tax and financial planning questions and answers advisors should be aware of regarding required minimum distributions, according to ALM’s Tax Facts Online.

(Graphics: Chris Nicholls/ALM)

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Top 12 RMD Tax Facts to Know

Related: Business Expense Tax Deductions: 12 Facts to Know

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1. What are the minimum distribution requirements for IRAs?

2. What can be done before the IRA required beginning date in order to minimize RMDs?

3. Is there a penalty for failure to comply with IRA RMD requirements?

4. How are the minimum distribution requirements met during an IRA owner’s lifetime?

5. What about inherited IRAs?

6. What is the difference between a spousal inherited IRA and a non-spousal inherited IRA? What do taxpayers need to be aware of with respect to the differences between these types of accounts?

7. What differences exist between the treatment of inherited IRAs and inherited 401(k)s?

8. Are inherited IRA funds exempt from the claims of a taxpayer’s creditors in bankruptcy?

9. Who is a “designated beneficiary” for purposes of RMDs from an IRA?

10. What are an IRA trustee’s reporting requirements with respect to RMDs?

11. What IRS filing requirements does an individual retirement plan participant have to meet?

12. May an employer contribute to an IRA on behalf of an employee? May an employer or union establish an IRA for its employees or members?

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Top 12 RMD Tax Facts to Know

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Related: Business Expense Tax Deductions: 12 Facts to Know

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1. What are the minimum distribution requirements for IRAs?

2. What can be done before the IRA required beginning date in order to minimize RMDs?

3. Is there a penalty for failure to comply with IRA RMD requirements?

4. How are the minimum distribution requirements met during an IRA owner’s lifetime?

5. What about inherited IRAs?

6. What is the difference between a spousal inherited IRA and a non-spousal inherited IRA? What do taxpayers need to be aware of with respect to the differences between these types of accounts?

7. What differences exist between the treatment of inherited IRAs and inherited 401(k)s?

8. Are inherited IRA funds exempt from the claims of a taxpayer’s creditors in bankruptcy?

9. Who is a “designated beneficiary” for purposes of RMDs from an IRA?

10. What are an IRA trustee’s reporting requirements with respect to RMDs?

11. What IRS filing requirements does an individual retirement plan participant have to meet?

12. May an employer contribute to an IRA on behalf of an employee? May an employer or union establish an IRA for its employees or members?

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