Retire Safe & Tax Free - Tax Season Q & A


woman calculates her taxes

Q: I requested my 2015 RMD on December 31st but my IRA custodian (the financial institution where my money is invested), told me I will get a 1099-R for 2016, not 2015... why?

A: The distribution year is determined by the processing date, not the request date. Make sure you know your IRA custodian's deadline for processing RMD requests. Some custodians require them to be submitted by early December to ensure processing is complete by the deadline. There is a 50% IRS penalty for failing to take an RMD by December 31st.

Q: I inherited an IRA from my brother. He passed away in July 2015 at age 76 and he hadn't taken his 2015 RMD yet, so I took it in October. Is this RMD reported on his estate tax return or my 2015 tax return?

A: Your tax return. Year of death RMDs are reported on the recipient's tax return.

Q: If I have a Roth IRA, aren't all of my distributions automatically tax free and penalty free?

A: No, only qualified Roth distributions are tax and penalty free. There are circumstances where there may be income tax due or an early distribution penalty.

Q: May I deduct losses in my IRA on my 2015 tax return?

A: Not unless you withdraw the entire balance from all of your IRAs of the same type. Losses and gains are not taken into account on your tax return while your IRA is still open.

Q: I retired and directly rolled over my entire 401(k), including my highly appreciated employer stock, to an IRA last year. I recently discovered that a Net Unrealized Appreciation (NUA) strategy could give me a huge tax advantage. Since I haven't filed my tax return yet, may I still elect to use an NUA strategy?

A: No. Unfortunately, once you rolled over your highly appreciated employer stock to an IRA, the opportunity to use an NUA strategy was permanently eliminated. To preserve an NUA strategy opportunity, among other requirements, the shares must have been transferred in-kind to a taxable account.

Marc H. Weiss, Archer Weiss Insurance & Financial Services, Inc. Please Call Toll free: 1-800-831-2901 or (818) 610-8560