While RMDs are often calculated by financial advisors, it’s definitely on us tax preparers to make sure our clients understand requirements for taking the money out and avoid common mistakes, such as combining two spouses RMDs into one distribution from one account, or assuming that taking out twice as much one year means the taxpayer can skip the RMD for the following year.
Advising our clients on utilizing the Qualified Charitable Distribution rules to reduce taxable income is also an important part of our job, as is explaining options to a client who has inherited a retirement account from a family member or friend.
If a client is in need of immediate funds and has money locked up in a retirement account but isn’t yet 59 ½, we can become the heroes of the hour by knowing the rules governing Separately Equal Periodic Payments! Using the SEPP strategy, also known as 72(t) distributions, can help a taxpayer get through a difficult financial time and save him or her thousands of tax dollars.
This class will explore the various rules and regs that govern distributions from tax-advantaged retirement plans with examples that clarify each point. We’ll also talk about taking distributions from inherited accounts and how the rules vary for different categories of beneficiary. Finally, we’ll take a look at Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, which we just might need to file to get a client out of a painful penalty.