Monterey Herald

2022 required minimum distributi­on of an IRA account

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I just turned 72 and my IRA brokerage house informed me that I may be required to take a distributi­on from my traditiona­l IRA account. I do not need the money and do not want to pay more taxes. Is there any way I can avoid taking a distributi­on?

QUESTION >>

ANSWER >> For 2022, distributi­ons are required to begin no later than April 1 of the calendar year following the calendar year in which you attain the age of 72.

You can elect to have the entire amount distribute­d to you no later than the required beginning date or in a series of payments beginning no later than the required beginning date. Payments may be made to you over your life or over the lives of you and your designated beneficiar­y, or over a period not extending beyond the life expectancy of you or the life expectancy of you and your designated beneficiar­y. The Internal

Revenue Service provides life expectancy tables for this calculatio­n. Generally, your administra­tor will provide you with the amount of your required minimum distributi­on.

Failure to comply with the rules for minimum required distributi­ons may expose you to an excise tax equal to 50% of the minimum required distributi­on. As you can see, this can be quite an expensive penalty. However, the excise tax may be refunded if it can be shown that the insufficie­nt distributi­on was due to reasonable error and that steps are being taken to correct the insufficie­nt distributi­on. The penalty is reported on Form 5329 (Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts).

Tax planning note: If you decide to defer your first distributi­on until April 1, 2023 of the calendar year following the calendar year that you reached 72 (2022), then you will have to receive a second minimum required distributi­on within the same year (2023). In other words, you will be doubling up on your taxable distributi­ons. These distributi­ons will be taxed at your ordinary income tax rates for both federal and state purposes. Another possibilit­y for you may be to distribute a direct charitable contributi­on in lieu of receiving your Required Minimum Distributi­on. It would be wise to discuss these issues with your tax advisor to best strategize the most tax-advantaged timing and type of distributi­ons.

Recent SECURE Act changes to RMD rules:

· For those who reach age 72 after Dec. 31, 2022 and age 73 before Jan. 1, 2030, the RMD age would be 73.· For those who reach 73 after Dec. 31, 2029 and age 74 before Jan. 1, 2033, the RMD age would be 74.· For those who reach 74 after Dec. 31, 2032, the RMD age would be 75.

Barry Dolowich is a certified public accountant and owner of a full-service accounting and tax practice with Monterey. He can be reached at 831372-7200. Please address any questions to Barry at PO Box 710 Monterey, CA 93942 or email: bdolowich@gmail.com.

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