Who will Benefit and Not Benefit From the Special QCD/RMD Rules for January 2011 ?
January 11, 2011
The new tax law expressly authorizes a person to make his or her QCD for 2010 by January 31, 2011. A special election must be made. Such QCD will count towards the person's RMD for 2010.
Not Benefiting.
If a person had already taken his or her RMD for 2010, the IRS has concluded per the Wall Street Journal that they will not grant any special relief to those individuals who had already taken their 2010 RMDs by allowing them to return the RMD funds to the IRA and then they would do a QCD. RMDs are ineligible to be rolled over.
Benefiting.
An individual attaining age 70½ in 2010 has a required beginning date of April 1, 2011. This is this person's deadline for taking his or her 2010 distribution. The deadline is not December 31, 2010. Although there will be some individuals who attain age 70½ in 2010 and who also take their RMD in 2010, there will be quite a few who wait to take their 2010 RMD in 2011. Such individuals who make a QCD and designate it for 2010 by January 31, 2011 will benefit.
There will also be living traditional IRA accountholders who attain age 70½ in a year before 2010, but who failed to take his or her RMD by December 31, 2010. On a tentative basis, such accountholders will owe the 50% excise tax for an excess accumulation. However, if these accountholders are willing to make a QCD for 2010 by January 31, 2011, such QCD will also count as his or her 2010 RMD. Thus the excess accumulation will be corrected retroactively.
The same type of situation may exist for an IRA beneficiary. For whatever reason, an IRA beneficiary may have failed to take his or her RMD by December 31, 2010. On a tentative basis, such beneficiary will owe the 50% excise tax for an excess accumulation. However, if this beneficiary is age 70½ and older and is willing to make a QCD for 2010 by January 31, 2011, such QCD will also count as his or her 2010 RMD. Thus the excess accumulation will be corrected retroactively.
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Categories: Pension Alerts
