April 1 Deadline Approaches for Taking Required Retirement Plan Distributions

IRS Reminds Taxpayers of April 1 Deadline to Take Required Retirement Plan Distributions

IRS Issue Number:  IR-2017-63

WASHINGTON — The Internal Revenue Service today reminded taxpayers who turned age 70½ during 2016 that, in most cases, they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Saturday, April 1, 2017.

The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. It also typically applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. A taxpayer who turned 70½ in 2016 (born after June 30, 1945 and before July 1, 1946) and receives the first required distribution (for 2016) on April 1, 2017, for example, must still receive the second RMD by Dec. 31, 2017. 

Affected taxpayers who turned 70½ during 2016 must figure the RMD for the first year using the life expectancy as of their birthday in 2016 and their account balance on Dec. 31, 2015. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B.

Most taxpayers use Table III  (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70½ in 2016 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary. Both tables can be found in the appendices to Publication 590-B. 

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Employees who are still working usually can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulation  in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

The IRS encourages taxpayers to begin planning now for any distributions required during 2017. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2017 RMD, this amount would be on the 2016 Form 5498 that is normally issued in January 2017.

IRA owners can use a qualified charitable distribution (QCD) paid directly from an IRA to an eligible charity to meet part or all of their RMD obligation. Available only to IRA owners age 70½ or older, the maximum annual exclusion for QCDs is $100,000. For details, see the QCD discussion in Publication 590-B.

A 50 percent tax normally applies to any required amounts not received by the April 1 deadline. Report this tax on Form 5329 Part IX. For details, see the instructions for Part IX of this form.

What is the Additional Medicare Tax? Will You Be Required to Pay?

What is the Additional Medicare Tax?

Below the IRS explains about the additional Medicare tax.

Some taxpayers may be required to pay an Additional Medicare Tax if their income is over a certain limit. The IRS would like people to know more about this tax.

  • Tax Rate. The Additional Medicare Tax rate is 0.9 percent.
  • Income Subject to Tax. The tax applies to the amount of wages, self-employment income and railroad retirement (RRTA) compensation that is more than a threshold amount. For more information, go to Questions and Answers for the Additional Medicare Tax.
  • Threshold Amount. Filing status determines the threshold amount. For those who are married and file a joint return, they must combine the wages, compensation or self-employment income of their spouse with their own. The combined total income determines if it is over the threshold for this tax. The threshold amounts are
Filing Status Threshold Amount
Married filing jointly $250,000
Married filing separately $125,000
Single $200,000
Head of household $200,000
Qualifying widow(er) with dependent child $200,000
  • Withholding / Estimated Tax. Employers must withhold this tax from wages or compensation when they pay employees more than $200,000 in a calendar year. Self-employed taxpayers should include it for estimated tax liability purposes.
  • Underpayment of Estimated Tax. People who had too little tax withheld or did not pay enough estimated tax may owe an estimated tax penalty. IRS Publication 505, Tax Withholding and Estimated Tax, provides rules and details on estimated taxes.

People who owe this tax should file Form 8959, with their tax return. People should also report any Additional Medicare Tax withheld by their employer or employers on Form 8959. IRS.gov offers more on this topic. Forms and publications are available on IRS.gov/forms anytime.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

22 Jaw-Dropping Stats About Retirement

22 Jaw-Dropping Stats About Retirement

Get these often-surprising retirement facts under your belt and they can help you make better decisions and take savvier actions, leading to a more comfortable retirement.

Selena Maranjian
Feb 25, 2017 at 6:21AM
“Retirement: It’s nice to get out of the rat race, but you have to learn to get along with less cheese.”
— Attributed to Gene PerretLearning to get along with less cheese in retirement isn’t fun for most people. You can make it less painful, though, by effectively planning and preparing for retirement. Here are more than 22 retirement stats most of us would do well to know about — and many of which are rather surprising.


1 ) Your retirement may last much longer than you expect. If you stop working at 62, for example, and live to 97, your nest egg will need to support you for 35 years!

2) Living to 97 isn’t unthinkable. According to the Social Security Administration, 30% of 50-year-old women and 19% of 50-year-old men will live to 90. A Barron’s article recently noted: “The most likely age for a 50-year-old woman to die is 88, and the most likely age for a man is 85. A woman is more likely to die at age 92 than at her life expectancy age of 83, and a man is more likely to die at age 89 than 80.”

3) Retiring at age 62 isn’t crazy, either. The average retirement age was recently 63 — and you can start collecting Social Security benefits as early as age 62.

4) You may end up retiring earlier than planned. According to the 2016 Retirement Confidence Survey, 46% of retirees left the workforce earlier than planned, with 55% citing health problems or a disability as the reason and 24% citing changes at work such as a downsizing or workplace closure. 

Retirement5) According to an Edward Jones survey, about 60% of Americans of varying ages are worried about healthcare expenses in retirement. That may be surprising, but it’s also quite reasonable, because of the following retirement fact. 

6) Health care can cost much more than you think it will. According to Fidelity Investments, a 65-year-old couple retiring today will spend, on average, a total of $260,000 out of pocket on health care.
7) If you’re late enrolling for Medicare, it can cost you. Your Part B premiums (which cover medical services, but not hospital services) can rise by 10% for each year that you were eligible for Medicare but didn’t enroll. The no-penalty enrollment period for most people is anytime within the three months leading up to your 65th birthday, during the month of your birthday, or within the three months that follow.8) Lots of people are saving for retirement. There are more than 600,000 defined-contribution plans such as 401(k)s, with more than 70 million people participating in them. As of late 2016, there was about $7 trillion in 401(k) plans and close to $8 trillion in IRAs.9) Income from 401(k) accounts has been estimated to represent about 25% to 30% of overall retirement income. According to the Social Security Administration, most elderly beneficiaries get 50% or more of their income from Social Security, while 21% of married ones and 43% of unmarried ones get fully 90% or more of their income from it.10) The average 401(k) account balance in Fidelity Investments-managed plans hit a record average of $92,500 as of tRetirementhe end of 2016. 

11) That $92,500 won’t last long in retirement, and most people have saved less than that. According to the 2016 Retirement Confidence Survey, about 26% of respondents said they had less than $1,000 saved for retirement. A whopping 64% had saved less than $50,000.

12) Divorce doesn’t help matters. According to a recent survey from the American Institute of CPAs, three-quarters of retirement-age divorcees lack a good understanding of how to manage their personal finances. (It’s typical in couples for one spouse to manage the family finances, leaving the other one underprepared in the event of divorce.)

13) Many parents (aged 19 to 37) and grandparents (aged 50 to 70) are living more simply to save more for retirement. They’re eating out less frequently (more than 45% of both groups), traveling less (29% of both groups), and living in a smaller home (25% or more of both groups). (This is according to a 2016 TD Ameritrade survey.)

14) The average monthly Social Security retirement benefit was recently about $1,360, or $16,320 for the year.

15) If you think you’ll get more than the figure above because your earnings were above-average, you’re right. But still, the maximum monthly benefit for those retiring at their full retirement age was recently $2,687, or only about $32,000 annually.

16) Up to 85% of your Social Security income can be taxed, if your income exceeds a specified level.

17) According to the Social Security Administration, retirement benefits for those with average earnings will likely replace about 40% of your pre-retirement earnings. Those who had above-average earnings in their working years can expect a lower replacement rate, and vice versa.

Retirement18) You can increase your Social Security checks by delaying starting to collect your benefits. For every year after your full retirement age that you delay starting to collect (up to age 70), your ultimate monthly check will grow by about 8%, giving you the opportunity to increase your benefits by about 24%.

19) On the other hand, if you start collecting early, at age 62, you can expect your checks to be about 30% smaller. That’s not so terrible, though, because you’ll collect many more of them. And the system is designed to be a wash for those who live average-length lives.

20) If you’re worried about running out of money in retirement, you may be surprised at how much income you can buy through an annuity. Here’s the kind of income that various people might be able to secure in the form of an immediate fixed annuity in the current economic environment:



Monthly Income Annual Income Equivalent
65-year-old man $100,000 $560 $6,720
70-year-old man $100,000 $655 $7,860
70-year-old woman $100,000 $600 $7,200
65-year-old couple $200,000 $958 $11,496
70-year-old couple $200,000 $1,051 $12,612
75-year-old couple $200,000 $1,216 $14,592


21) Retirement doesn’t always play out as expected. A 2014 MassMutual survey found that 10% of retirees were surprised to find themselves lonely, bored, with a lost sense of purpose, and/or depressed in retirement. You may be tired of working, but the routine of having a place to go and things to do every day may be serving you well.

22) Finally, here’s some good news, despite all the worrisome findings above: That same survey found that 72% of retired respondents reported feeling quite happy or extremely happy in retirement.

To a great degree, whether you’re happy or frustrated in retirement will depend on how well you prepare for it — financially and psychologically. It can help to get and stay healthy throughout your life and to always have an active social life. And, of course, save aggressively for your golden years.

401K Salt Lake City

Solo 401K Salt Lake City

If you are looking for any last minute tax planning ideas, look no further than a Solo 401K Salt Lake City UT.  Here is a brief summary of this robust tax deferral tool.

Available for business owners with no other full-time employees – Sole Proprietorships, Partnerships, LLCs and Corporations (S or C).

  • Employees under age 21 or who work less than 1,000 hours annually can be excluded.
  •  A husband and wife working in the same business can be considered as one owner.

Maximum annual employer contribution is:

  •  25% of owner compensation (salary) with employer and employee contributions not to exceed                    $49,000 (2011) $50,000 (2012) plus up to $5,500 for elective deferral catch-up contributions.
  • Self-employment compensation is 20% of Schedule C net earned income less half the self-                                     employment tax deduction.  Effectively, the 25% contribution is limited to 20% of net earned                             income before the owner’s contribution.

Contributions can be made after age 70 ½ but required minimum distributions must still be taken.

Maximum annual employee elective deferral (salary reduction) contribution is the lessor of 100% of                         compensation or $16,500 (plus $5,500 for catch-up if 50 or over).

As you can see some significant pre tax dollars can be deferred with this plan.  An additional added benefit is that the complexity of a regular 401K as it pertains to nondiscrimination rules are not applicable in a Solo 401K.

Areas of Service: 401K Salt Lake City UT, 401K South Jordan UT, 401K West Jordan UT

Nondeductible IRA Salt Lake City UT

Nondeductible IRA Salt Lake City UT

Just a reminder that if any of you have made contributions to IRAs in the past where there has been a nondeductible portion of the contribution, you must keep track of this amount and file Form 8606 to substantiate it on a yearly basis.  If you don’t do this the IRS may challenge the nontaxable portion of a distribution containing this previous nondeductible contribution.  Again it is imperative that you keep track of this from year to year. Nondeductible IRA Salt Lake City UT.