RMD and Roth Recharacterization

I’m scratching my head, too: why is the same question being asked of you over and over? Expecting a different answer this time? Very strange…

Pete

Ahhh, now I understand!

So if someone has an RMD for 2024 of $20,000 and they withdraw a total of $19,999 in 2024, then they have to withdraw another $20,000 before April 1, 2025 to satisfy the 2024 RMD (and additionally withdraw the 2025 RMD during 2025).

(This brings up a weird corner case issue. Sometimes partnerships will update their K1 a year or even two later. That can potentially change the Dec 31 value after you’ve used it to calculate RMD. In fact, many years ago, I invested into USO as a hedge against rising energy prices, and even 2 years after I sold it, they sent me a K1 with small numbers changed on it. That was in a taxable account, so wouldn’t affect RMDs, but I think those kinds of things can be purchased inside an IRA as well. I suppose if you have such things in your IRAs, you should over-withdraw each year by a little bit just in case.)

In that case, they could probably just ask for forgiveness on the 50% penalty for the $1 that they failed to withdraw in 2024.

Investments that issue K-1s that can result in UBTI (like many MLPs) are not good holdings to have in a retirement account for many reasons, not just your corner case issue. They can cause your IRA to have to file it’s own tax return, taxed at trust rates, and the taxes must be paid from the IRA.

AJ

Interestingly, Google AI still says you can:

Yes, you can split your first Required Minimum Distribution (RMD) over two years, meaning you can take a portion of it in the year you reach RMD age and the remaining portion by April 1st of the following year; this is only applicable to your first RMD and is considered a one-time option.

Maybe I’m missing something, but isn’t that one of AJ’s points?

Pete

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Well, I would disagree with Google AI, since IRS Pub 590-B says:

image

To me - “each year” indicates that an RMD has to be taken in a single calendar year.

AJ

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I’m not arguing with you about it. I just found it interesting that Google AI says otherwise. Usually that comes from someplace, even if wrong.

On a side note, I also found one other reference to this question that states the same thing but it is from a source dated 2014 so I would not trust that either.

Seems like a somewhat common misconception. Here’s a FAQ in Kiplinger’s magazine that says similar -

Because this is your first RMD, the deadline is April 1 of the following year. And, yes, you can split the total amount of your first RMD any way you choose between 2018 and early 2019.

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I guess you can try it. I’m not going to for the reasons I already explained.

AJ

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Mark why don’t you give it a rest?

I am tried of being reminded of my deceased mother-inlaw who kept asking people the same question until someone replied with what she wanted.

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I’ve already agreed with @aj485 interpretation of this issue a few days ago (in fact I would rely on her interpretation of all tax law!), I was just trying to point out that the misconception exists out there. If the discussion annoys you as much as your mother-in-law did (may she rest in peace), perhaps consider muting the thread?

I would never try it. I don’t do anything complex tax-wise because it’s too easy to make a mistake that is difficult (or impossible) to rectify. I’ve never done an IRA recharacterization, I’ve never done a Roth conversion, heck even when I invested in USO years ago, the whole K-1 thing was annoying as heck, I don’t take any itemized deductions, I take just the standard deduction for years now, etc.

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