Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Thursday, October 29, 2009

Recent IRS Notice Could Save You on Taxes

For those of you over age 70 and ½, who have been required to start taking minimum required distributions from your non-Roth IRAs and defined contribution plans, there may be an opportunity to save on income taxes for 2009. Many of you are likely aware that minimum required distributions were suspended for 2009 for any defined contribution plan or IRA.

While this was good news for retirees, some were not able to take advantage of the waiver, since their retirement plans kept making distributions regardless of the IRS waiver. In many cases the retirement plan documents required that distributions continue. In other cases, individuals were unaware of the waiver and failed to take action to stop distributions.

A recent IRS notice, IR-2009-85, Sept. 24, 2009, allows a participant or surviving spouse to roll over required minimum 2009 distributions from an IRA or defined contribution plan to another plan or IRA. The deadline for rolling over the distributions is November 30th, 2009 or 60 days after making the distribution, whichever is later.

Not everyone can roll over distributions taken. Non-spouse beneficiaries cannot roll over distributions. And, if you took several distributions from your IRA (e.g., $1000 a month from January through September), you may only roll over one of the distributions. Therefore, if you took only one, large distribution, the waiver may be of significant benefit. For multiple smaller distributions, the benefit of the waiver is less significant.

There is no extended due date for rollovers for distributions in excess of the minimum required distribution. And, those who are taking a series of substantially equal periodic payments (e.g. 72(t) payments) from a 401(k) or IRA cannot apply the waiver. If you think you might benefit from the IRS notice, we strongly recommend you discuss your situation with your tax advisor.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home