Once a taxpayer reaches the age of 70 and a half they are required by the IRS to start making minimum distributions from their traditional IRA. The taxpayer is allowed however to begin making the distributions on April 1st of the year following the year in which they have turned 70 and a half years old.
It is important to remember that if a taxpayer waits until April 1st of the following year they will be required to take two distributions in one year. This will generally raise their tax liability in that year and become a larger burden for the taxpayer than they originally anticipated.
Required Minimum Distribution Amount
Generally speaking, the minimum required distribution is equal to the value of the traditional IRA divided by the individual’s remaining life expectancy. The federal government has made available to the public a remaining life expectancy chart which can be found under the Uniform Lifetime Table. This table governs most required lifetime distributions by prescribing distribution periods depending on the age of the individual.
If a taxpayer fails to follow the rules prescribed by the government, the taxpayer will usually be penalized by the assessment of additional taxes. The failure to take a distribution at least equal to the required minimum distribution is 50 percent of the insufficiency. An example would be if a taxpayer failed to take a minimum distribution of $15,000 and only took $5,000, the failure to take the other $10,000 would result in a tax penalty of $5,000.
Death Required Distributions
Not only are distributions required during a traditional IRA owner’s lifetime, they are also required at their death. If the owner happens to die prior to the date of when the minimum required distributions are to start, the date of death will trigger the required distribution rules.