Nevada residents beware, IRS watching for IRA distributions
Nevada residents may be gearing up to begin tax return preparation. While many people remember to donate to their favorite charities, they may not remember to make their IRA distributions. The IRS is warning taxpayers to ensure they make the required distributions because they will likely crack down in an effort to control the loss in tax revenue.
Many will miss the deadline for taking their IRA distributions. While some people have companies that will do it for them, those who plan on taking action on their own would do well to remember before they are hit with a stiff financial penalty from the IRS. The amount of the penalty depends and is based upon the difference of the amount supposed to have been taken and the amount actually removed.
This means if someone was supposed to take a distribution of $1,000, but failed to take out anything, they would have a $500 penalty. The rules for the IRA distribution vary and are based on someone’s age and whether the IRA is inherited. ROTH IRA’s have no minimum distribution rules, but others require residents who reach the age of 70 and a half to begin taking out money. However, it may be a good idea to pay attention, especially if people have taken money out of pension plans and then rolled the money into an IRA. The distribution rules for that action could be different.
Tax rules and IRA distribution rules can be plenty confusing and may require help to decipher them. Any Nevada resident who finds themselves in debt to the IRS due to a mistake like this may need to seek out assistance about the issue. Doing so could help them navigate the confusing waters of tax law, and smooth the problem over before it gets much worse.
Source: CNBC, “IRS Reminds You to Take IRA Distributions – Or Else,” Susan Tompor, Dec. 20, 2012