Confused about IRA RMD date

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tc101
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Confused about IRA RMD date

Post by tc101 » Mon Apr 15, 2019 1:45 pm

The IRS web site says:
Beginning date for your first required minimum distribution
IRAs (including SEP and SIMPLE IRAs)
April 1 of the year following the calendar year in which you reach age 70½.
I am now 69 and turn 70 in Jan of 2020. I will turn 70.5 in July 2020. That means I am required to take a RMD in April 2021. Does that mean that for tax year 2020, there would be no RMD? And for tax year 2021, I have to take the full yearly RMD, or just a partial yearly RMD based on starting April 15 2021?

Or does it mean that on April 15 2021, I have to take the RMD for tax year 2020, pay taxes on it on my 2020 tax return?
. | The most important thing you should know about me is that I am not an expert.

Gill
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Re: Confused about IRA RMD date

Post by Gill » Mon Apr 15, 2019 1:54 pm

tc101 wrote:
Mon Apr 15, 2019 1:45 pm
The IRS web site says:
Beginning date for your first required minimum distribution
IRAs (including SEP and SIMPLE IRAs)
April 1 of the year following the calendar year in which you reach age 70½.
I am now 69 and turn 70 in Jan of 2020. I will turn 70.5 in July 2020. That means I am required to take a RMD in April 2021. Does that mean that for tax year 2020, there would be no RMD? And for tax year 2021, I have to take the full yearly RMD, or just a partial yearly RMD based on starting April 15 2021?

Or does it mean that on April 15 2021, I have to take the RMD for tax year 2020, pay taxes on it on my 2020 tax return?
No, you have a RMD for 2020 and another for 2021. You can take the 2020 RMD as late as 4/1/21 but you will then have two distributions in 2021 because the 2021 RMD must be taken by 12/31/2021.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Alan S.
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Re: Confused about IRA RMD date

Post by Alan S. » Mon Apr 15, 2019 1:57 pm

tc101 wrote:
Mon Apr 15, 2019 1:45 pm
The IRS web site says:
Beginning date for your first required minimum distribution
IRAs (including SEP and SIMPLE IRAs)
April 1 of the year following the calendar year in which you reach age 70½.
I am now 69 and turn 70 in Jan of 2020. I will turn 70.5 in July 2020. That means I am required to take a RMD in April 2021. Does that mean that for tax year 2020, there would be no RMD? And for tax year 2021, I have to take the full yearly RMD, or just a partial yearly RMD based on starting April 15 2021?

Or does it mean that on April 15 2021, I have to take the RMD for tax year 2020, pay taxes on it on my 2020 tax return?
You must distinguish between the years FOR WHICH you must take an RMD, and when the first RMD must be distributed, which is called the "required beginning date" or RBD.

Your first RMD distribution year is 2020. The RMD for 2020 or any portion of it can be delayed to 4/1/2021 (not 4/15). Your 2021 RMD must be distributed by 12/31/2021. These RMDs are taxable in the year you receive them. Therefore, if you delay your 2020 RMD to 2021, you will be taxed on 2 RMDs in 2021. That is rarely beneficial since it can increase your tax bill for 2021 more than it reduces it for 2020. But in a few cases it might be beneficial and to be sure you would have to crunch the numbers, probably late in 2020.

22twain
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Re: Confused about IRA RMD date

Post by 22twain » Mon Apr 15, 2019 1:59 pm

[Corrections made based on my understanding of later posts.]
[...and now I've un-done one correction that turned out to be in error...]

Your first RMD is for the year 2020. It is based on your IRA balance as of 12/31/2019. You must take this RMD by 4/1/2021. and include it on your 2020 tax return which is due on 4/15/2021. If you take this RMD by 12/31/2020, you include it on your 2020 tax return which is due on 4/15/2021. If you delay this RMD into 2021, you include it on your 2021 tax return which is due on 4/15/2022.

Your second RMD is for the year 2021. It is based on your IRA balance as of 12/31/2020. You must take this RMD by 12/31/2021, and include it on your 2021 tax return which is due on 4/15/2022.

Succeeding RMDs follow the pattern of your second RMD, for succeeding years, without the added complexity introduced by a possible delayed 2020 RMD.

And now I suspect that there may be additional complexities if part of the first RMD is taken in 2020 and part is delayed into 2021. :twisted:

(Gill and Alan snuck in before me while I was looking up calendars to make sure 4/15 doesn't fall on a weekend in those years. :wink: )
Last edited by 22twain on Mon Apr 15, 2019 8:18 pm, edited 3 times in total.
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delamer
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Re: Confused about IRA RMD date

Post by delamer » Mon Apr 15, 2019 2:01 pm

You aren’t required to take the 2020 RMD in April 2021.

You can take it that late, but you also can take it anytime from January 1, 2020 until then.

Gill
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Re: Confused about IRA RMD date

Post by Gill » Mon Apr 15, 2019 2:12 pm

22twain wrote:
Mon Apr 15, 2019 1:59 pm
Your first RMD is for the year 2020. It is based on your IRA balance as of 12/31/2019. You must take this RMD by 4/15/2021,
Must be taken by 4/1/21, not 4/15/21.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: Confused about IRA RMD date

Post by oldcomputerguy » Mon Apr 15, 2019 2:14 pm

22twain wrote:
Mon Apr 15, 2019 1:59 pm
Your first RMD is for the year 2020. It is based on your IRA balance as of 12/31/2019. You must take this RMD by 4/1/2021, and include it on your 2020 tax return which is due on 4/15/2021.
If the OP were to delay the 2020 RMD until April 2021, wouldn't it be reported on the 2021 tax return filed in 2022?
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

Gill
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Re: Confused about IRA RMD date

Post by Gill » Mon Apr 15, 2019 2:16 pm

oldcomputerguy wrote:
Mon Apr 15, 2019 2:14 pm
22twain wrote:
Mon Apr 15, 2019 1:59 pm
Your first RMD is for the year 2020. It is based on your IRA balance as of 12/31/2019. You must take this RMD by 4/1/2021, and include it on your 2020 tax return which is due on 4/15/2021.
If the OP were to delay the 2020 RMD until April 2021, wouldn't it be reported on the 2021 tax return filed in 2022?
Yes, but if he delayed it into April and beyond 4/1/2021 he'd be too late and subject to a penalty. See my post above.
Gill
Last edited by Gill on Mon Apr 15, 2019 2:31 pm, edited 1 time in total.
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Re: Confused about IRA RMD date

Post by oldcomputerguy » Mon Apr 15, 2019 2:29 pm

Gill wrote:
Mon Apr 15, 2019 2:16 pm
oldcomputerguy wrote:
Mon Apr 15, 2019 2:14 pm
22twain wrote:
Mon Apr 15, 2019 1:59 pm
Your first RMD is for the year 2020. It is based on your IRA balance as of 12/31/2019. You must take this RMD by 4/1/2021, and include it on your 2020 tax return which is due on 4/15/2021.
If the OP were to delay the 2020 RMD until April 2021, wouldn't it be reported on the 2021 tax return filed in 2022?
Yes, but if he delayed it into April and beyond 4/1/2021 he's be too late and subject to a penalty. See my post above.
Gill
Agreed. Thanks for the clarification.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

sport
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Re: Confused about IRA RMD date

Post by sport » Mon Apr 15, 2019 2:32 pm

Another consideration. If you delay the first RMD into 2021, your second RMD, which is for 2021, will be larger than if you took your first RMD in 2020. The reason for this is that your 2021 RMD will be calculated based on your account balance on 12/31/2020. So, if you delay the first RMD past 12/31/2020, you will have two taxable RMDs in 2021 and the second one will be larger than it needs to be.

Gill
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Re: Confused about IRA RMD date

Post by Gill » Mon Apr 15, 2019 2:40 pm

sport wrote:
Mon Apr 15, 2019 2:32 pm
Another consideration. If you delay the first RMD into 2021, your second RMD, which is for 2021, will be larger than if you took your first RMD in 2020. The reason for this is that your 2021 RMD will be calculated based on your account balance on 12/31/2020. So, if you delay the first RMD past 12/31/2020, you will have two taxable RMDs in 2021 and the second one will be larger than it needs to be.
No, that's incorrect. The 2020 RMD is deducted from the 12/31/20 balance before the 2021 RMD is calculated.
Gill
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22twain
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Re: Confused about IRA RMD date

Post by 22twain » Mon Apr 15, 2019 3:27 pm

Gill wrote:
Mon Apr 15, 2019 2:12 pm
22twain wrote:
Mon Apr 15, 2019 1:59 pm
Your first RMD is for the year 2020. It is based on your IRA balance as of 12/31/2019. You must take this RMD by 4/15/2021,
Must be taken by 4/1/21, not 4/15/21.
Gill
Corrected, thanks. I've also included further corrections based on when to report a delayed first RMD. I was thinking it was the same as with a delayed IRA contribution, but now I see it's not.
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sport
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Re: Confused about IRA RMD date

Post by sport » Mon Apr 15, 2019 4:25 pm

Gill wrote:
Mon Apr 15, 2019 2:40 pm
sport wrote:
Mon Apr 15, 2019 2:32 pm
Another consideration. If you delay the first RMD into 2021, your second RMD, which is for 2021, will be larger than if you took your first RMD in 2020. The reason for this is that your 2021 RMD will be calculated based on your account balance on 12/31/2020. So, if you delay the first RMD past 12/31/2020, you will have two taxable RMDs in 2021 and the second one will be larger than it needs to be.
No, that's incorrect. The 2020 RMD is deducted from the 12/31/20 balance before the 2021 RMD is calculated.
Gill
Gill,
That is interesting. So, if the first year RMD is delayed to the second year, the end balance for the first year is to be adjusted for the second year RMD calculation, even though the RMD was not taken until the next year. Is that what you are saying? That does not seem to be consistent with IRS 590B, which states:
"Distributions. Distributions reduce the account balance in the year they are made. A distribution for last year made after December 31 of last year reduces the account balance for this year, but not for last year. Disregard distributions made after December 31 of last year in determining your required minimum distribution for this year."

Gill
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Re: Confused about IRA RMD date

Post by Gill » Mon Apr 15, 2019 5:48 pm

sport wrote:
Mon Apr 15, 2019 4:25 pm
Gill wrote:
Mon Apr 15, 2019 2:40 pm
sport wrote:
Mon Apr 15, 2019 2:32 pm
Another consideration. If you delay the first RMD into 2021, your second RMD, which is for 2021, will be larger than if you took your first RMD in 2020. The reason for this is that your 2021 RMD will be calculated based on your account balance on 12/31/2020. So, if you delay the first RMD past 12/31/2020, you will have two taxable RMDs in 2021 and the second one will be larger than it needs to be.
No, that's incorrect. The 2020 RMD is deducted from the 12/31/20 balance before the 2021 RMD is calculated.
Gill
Gill,
That is interesting. So, if the first year RMD is delayed to the second year, the end balance for the first year is to be adjusted for the second year RMD calculation, even though the RMD was not taken until the next year. Is that what you are saying? That does not seem to be consistent with IRS 590B, which states:
"Distributions. Distributions reduce the account balance in the year they are made. A distribution for last year made after December 31 of last year reduces the account balance for this year, but not for last year. Disregard distributions made after December 31 of last year in determining your required minimum distribution for this year."
The language you quote refers to amounts converted to a Roth IRA, not RMD’s.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

sport
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Re: Confused about IRA RMD date

Post by sport » Mon Apr 15, 2019 6:07 pm

Gill wrote:
Mon Apr 15, 2019 5:48 pm
sport wrote:
Mon Apr 15, 2019 4:25 pm
Gill wrote:
Mon Apr 15, 2019 2:40 pm
sport wrote:
Mon Apr 15, 2019 2:32 pm
Another consideration. If you delay the first RMD into 2021, your second RMD, which is for 2021, will be larger than if you took your first RMD in 2020. The reason for this is that your 2021 RMD will be calculated based on your account balance on 12/31/2020. So, if you delay the first RMD past 12/31/2020, you will have two taxable RMDs in 2021 and the second one will be larger than it needs to be.
No, that's incorrect. The 2020 RMD is deducted from the 12/31/20 balance before the 2021 RMD is calculated.
Gill
Gill,
That is interesting. So, if the first year RMD is delayed to the second year, the end balance for the first year is to be adjusted for the second year RMD calculation, even though the RMD was not taken until the next year. Is that what you are saying? That does not seem to be consistent with IRS 590B, which states:
"Distributions. Distributions reduce the account balance in the year they are made. A distribution for last year made after December 31 of last year reduces the account balance for this year, but not for last year. Disregard distributions made after December 31 of last year in determining your required minimum distribution for this year."
The language you quote refers to amounts converted to a Roth IRA, not RMD’s.
Gill
That language is on page 7 under the heading: "Figuring the Owner's Required Minimum Distribution"

Gill
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Re: Confused about IRA RMD date

Post by Gill » Mon Apr 15, 2019 6:26 pm

I guess you’re right. What am I thinking of where there is an adjustment made in the value? Is it with outstanding recharacterizations or rollovers?
Gill
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Alan S.
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Re: Confused about IRA RMD date

Post by Alan S. » Mon Apr 15, 2019 6:43 pm

sport wrote:
Mon Apr 15, 2019 4:25 pm
Gill wrote:
Mon Apr 15, 2019 2:40 pm
sport wrote:
Mon Apr 15, 2019 2:32 pm
Another consideration. If you delay the first RMD into 2021, your second RMD, which is for 2021, will be larger than if you took your first RMD in 2020. The reason for this is that your 2021 RMD will be calculated based on your account balance on 12/31/2020. So, if you delay the first RMD past 12/31/2020, you will have two taxable RMDs in 2021 and the second one will be larger than it needs to be.
No, that's incorrect. The 2020 RMD is deducted from the 12/31/20 balance before the 2021 RMD is calculated.
Gill
Gill,
That is interesting. So, if the first year RMD is delayed to the second year, the end balance for the first year is to be adjusted for the second year RMD calculation, even though the RMD was not taken until the next year. Is that what you are saying? That does not seem to be consistent with IRS 590B, which states:
"Distributions. Distributions reduce the account balance in the year they are made. A distribution for last year made after December 31 of last year reduces the account balance for this year, but not for last year. Disregard distributions made after December 31 of last year in determining your required minimum distribution for this year."
sport is correct.
The RMD rules were simplified starting in 2003, so the balance adjustments made previously were eliminated at that time. The following is copied from the IRS 2002 RMD Regs preamble:

An employee's account balance for the valuation calendar year that is also the employee’s first distribution
calendar year is no longer reduced for a distribution on April 1 to satisfy the minimum
distribution requirement for the first distribution calendar year. Contributions made
after the calendar year that are allocated as of a date in the prior calendar year are no
longer required to be added back. The only exceptions are rollover amounts, and
recharacterized conversion contributions, that are not in any account on December 31
of a year. These changes are made to the qualified plan rules as well as IRA rules to
maintain the parity between the rules.
Of course, reference to recharacterized conversions is now inapplicable since they are no longer allowed.

Gill
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Re: Confused about IRA RMD date

Post by Gill » Mon Apr 15, 2019 7:18 pm

Thanks, Alan. I thought I wasn’t inventing law Obviously, however, I was reciting old law which was in effect when I was more involved with administering IRA’S.
Gill
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tc101
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Re: Confused about IRA RMD date

Post by tc101 » Mon Apr 15, 2019 9:20 pm

Thanks everyone for the in depth explanations. I am clear on how this works now.
. | The most important thing you should know about me is that I am not an expert.

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