Required Minimum Distributions – It’s Almost That Time Again

Featured Image

As 2019 enters its home stretch, tax time is probably the last thing most of us are thinking about as the holidays approach. New Year’s Eve will be here before we know it, so it may benefit some self-directed investors to begin contemplating required minimum distributions (RMDs) among other tax-related matters. As written in the Internal Revenue Code, an account holder who made tax-deferred contributions to a Traditional IRA (or a similar pre-tax plan) must begin repayment of those taxes upon reaching a certain age. Accordingly, clients who meet the following criteria will be subject to RMDs:

  • SEP, SIMPLE, or Traditional IRA holders who are age 70 ½ or above have until December 31 to take their 2019 RMDs.
  • Non-spouse Inherited IRA account holders must take RMDs regardless of age, also before December 31.
  • Those who turn 70 ½ or inherit a non-spouse IRA in a particular year may defer their first RMDs until April 1, the following year. All subsequent RMDs will be due December 31 per usual.

To calculate your RMD, you’ll need your end-of-year balance from the previous year and a numerical factor that corresponds with your age (other factors may dictate the calculation as well). The distributed funds will be reported as income and indicated on Form 1099-R, which you will receive before the tax filing deadline. Other considerations include:

  • If you have multiple pre-tax accounts, each will bear an RMD amount. However, you’re under no obligation to take separate distributions. For instance, if you owe $1,000 from each of your three Traditional IRAs, you may execute a single $3,000 distribution from any one of them.
  • You don’t have to fulfil an RMD all at once. You may collect small withdrawals over the course of the year and still avoid IRS penalties, provided the full required minimum is cumulatively distributed by the deadline.
  • In-kind distributions – In the absence of an available cash balance, you are not required to sell your holdings prior to distribution. Physical assets may be distributed without liquidation, at which point they would become your personal property. The fair market value of assets distributed in-kind will be recorded as income on the Form 1099-R.

At New Direction Trust Company, we take pride in the prompt and accurate completion of these transactions. We understand that RMDs may seem like a burden, but we’re happy to help with every step of the process. Please don’t hesitate to give us a call at 877-742-1270 or send us an e-mail at if you have any questions. You may also complete our Distribution and Notice of Withholding Form via DocuSign by clicking this link - Begin the RMD process.