When do you take that initial required minimum distribution, and does that take care of all of that calendar year?

It depends, the article says. If you turned 70½ last year and waited until this year to take all or part of your first required minimum distribution, you would still need to take your 2014 required minimum distribution by Dec. 31st of 2014. Likewise, withdrawals above and beyond the minimum in one year do not count toward required distributions in future years-you cannot apply it forward.

In which year is that first distribution taxable?

The Wall Street Journal article says the basic answer is that the initial distribution is taxable in the year it is taken. So if you delayed taking it until 2014, the taxable portion of both your initial distribution and your 2014 distribution must be reported as income on your 2014 tax return. If those withdrawals are large enough, it could put you in a higher tax bracket this tax year. The financial institution that administers your IRA should be able to calculate your required minimum distribution and your IRA balance as of the previous year’s end. Some IRA administrators will automatically calculate your required minimum distribution and then transfer it to an account of your choice, the WSJ says.

Can one have the financial institution that handles his IRA withhold the tax on his distribution, and, if so, whether the tax itself would still count toward his required minimum distribution amount?

Yes to both parts of this question. In fact, unless you request otherwise, your IRA administrator must withhold federal (and, if applicable, state tax on your distribution), along with reporting withdrawals and any taxes withheld to you and the IRS on Form 1099-R.

Questions about IRA distributions, tax ramifications, and planning for retirement should be directed to an experienced estate planning attorney. He or she will be able to help you put together the best strategy based on your needs and objectives.

For more information, please visit my estate planning website.

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.
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