Posts Tagged ‘IRA Distributions’

Your Big Question About IRA Distributions and Social Security Benefits

Monday, November 23rd, 2015

ira dist and SS

Q: Is the income I receive from my IRA distribution included in the calculation that determines how much of my social security benefits will be taxed?

A: Generally, yes. If the IRA distribution you receive is taxable, like with a traditional IRA, and not a return of your previous non-deductible contributions, it will be included as part of your Adjusted Gross Income (AGI) on your tax return. The amount of your social security benefits that is taxable is determined by calculating your combined income. To find your combined income amount, add up your Adjusted Gross Income, plus your nontaxable interest, plus 50% of your social security benefits.

If your IRA distribution is taxable like with a traditional IRA, it should be included in your Adjusted Gross Income, so that it’s easy to determine what portion of your social security benefits are taxable.

If you know your federal tax filing status and your combined income, you can use the following guidelines from the Social Security Administration to see how much of your benefits are taxable.

If you file a federal tax return as an individual and your combined income is the following:

  • Between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • More than $34,000, up to 85 percent of your benefits may be taxable.

If you file a joint return, and you and your spouse have a combined income that is:

  • Between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
  • More than $44,000, up to 85 percent of your benefits may be taxable.

If you are married and file a separate tax return, you probably will pay taxes on your benefits.

For more information about calculating your “combined income” or the taxation of social security benefits visit the Social Security Administration’s website at www.ssa.gov.

Required Minimum Distributions

Tuesday, November 12th, 2013

ITS ABOUT THAT TIME AGAIN!

REQUIRED MINIMUM DISTRIBUTIONS

You may have already received notice from us that its about that time of year again when you may need to take an Required Minimum Distribution (RMD) from your Self-Directed IRA account. An RMD is the minimum amount you are required by the IRS to take from your retirement account each year. You, as the account holder and/or inheritor of a retirement account, are responsible for calculating and taking your RMD on time.  Here are some of the basics. bday cake

HAPPY BIRTHDAY!

If you were lucky enough to turn 70½ years old this year, you need to take your RMD by 4/1, and take it every 12/31 in the preceding years. If you turned 70½  years old last year, you need to take your RMD by 12/31. When it comes to Self-Directed IRAs, it does not matter if you are working or retired, you need to take an RMD when turning 70½.

YOU INHERITED AN IRA

When you inherit an IRA from a spouse you do not have to take the required minimum distributions; however, its a different story if you inherit money from someone other than your spouse.  Non-spousal IRA heirs must withdrawal the minimum amount each year starting December 31st of the year after the IRA was inherited, whether it is a traditional IRA or a Roth IRA.

HOW TO CALCULATE

To calculate, use your account balance as of December 31st of the prior year and divide it by the account holder’s life expectancy or the inheritor’s life expectancy.   Find the Life Expectancy Chart from IRS.GOV – see Publication 590.

Remember, when you have hard-to-value assets in your Self-Directed account, like real estate, LLCs, Trusts, Private Placements, etc., they need to have a value so you know your full account balance as of December 31 of the prior year.  When it comes to real estate, you need a fair market appraisal completed by a licensed real estate appraiser.  If it’s a non-real estate asset and you need help finding a trusted, reliable person to help with a valuation, let us know and we will send you the name of someone you can contact. Income tax is required on the payout unless  your Self-Directed IRA is a Roth account. Here is the IRA RMD Worksheet for IRA account holders whose spouse is 10 or more years younger and is the sole beneficiary of the Self-Directed IRA.   Please note that this category has a different life expectancy table.  See Appendix C Life Expectancy Table II (Joint Life & Last Survivor Expectancy)

FAQ – FREQUENTLY ASKED QUESTIONS

♦   What if I have more than one self-directed IRA account?

›  If you have more than one Self-Directed IRA, you must calculate an RMD amount for each account; however, you may withdrawal each amount from one Self-Directed IRA account.

♦  Who is responsible for calculating my RMD amount and making sure its withdrawn from my account on time?

›  You, as the account holder and/or inheritor.

♦  What happens if I do not take my RMD by the required deadline?

›  If you fail to withdrawal your RMD on time, or you do not withdrawal the full amount you are in trouble.  The amount you failed to withdrawal is taxed at 50%.  You will need to file a Form 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax Favored Accounts with your Federal tax return for the year in which your RMD was to be taken from your Self-Directed IRA.  However, your penalty may be waived if you establish that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall.  Simply file said Form 5329 and attach a letter of explanation.  This form and the instructions for this form should only be taken from the IRS.GOV website.

♦ Can a distribution in excess of the RMD for one year be applied to the RMD for a future year?

›  No.

♦  Can RMD amounts be rolled over into another tax-deferred account?

› No.

HOW DO I TAKE MY DISTRIBUTION?

Once you have calculated your RMD amount, simply complete our withdrawal form so we can send your RMD from your Self-Directed IRA account. Once the form is complete, you can fax (1-877-890-0929), email ([email protected]), or mail it to us (515  East 4500 South, Suite G-200, Salt Lake City, UT 84107). All forms must be turned in by December 31st of the year the RMD is due. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation. Author: Jaclyn Grella 800-454-2649 x1119 [email protected] Find me on Facebook, LinkedIn, Twitter and Google Plus Find Accuplan on Twitter Google Plus, You Tube and Facebook