Published: March 16, 2008 12:30 am            

Do these April deadlines apply to you?

Do either of these IRA deadlines apply to you or your family?

• Deadline No. 1. If you reached age 70? last year, April 1, 2008, could be an important deadline. That’s the last day you can take your 2007 required minimum distribution (RMD) from your traditional IRAs. If you miss the deadline, the penalty could be a 50 percent excise tax on the amount you should have withdrawn.

Here’s how the rules work. Once you reach age 70?, you must start taking annual distributions from your traditional IRAs. Normally these distributions must occur by December 31 of each year. But a special rule lets you defer the first distribution until April 1 of the year after you reach age 70?. So if you turned 70? last year, April 1, 2008, is the deadline for your 2007 distribution. Be aware that you’ll still need to take your 2008 RMD before the end of this year. The RMD rules don’t apply to Roth IRAs. Unless you’re still working, this deadline also applies to your other retirement accounts.

Generally, the amount of the RMD for any year is based on your age. You take the balance in all your traditional IRAs as of the last day of the previous year, and divide by a factor representing your life expectancy. The IRS has published a standard life expectancy table to use in the calculation. Special rules might apply if your spouse is more than ten years younger than you are.

Because all or part of your distribution may be taxable income, it is important to include RMDs in your tax planning. Ideally you should start planning for RMDs several years before you reach age 70?. But whether you’re planning in advance or looking at a distribution on April 1, contact our office for more detailed advice.

• Deadline No. 2. April 15, 2008, is the last day you can make an IRA contribution for the year 2007. Remember, the 2007 contribution limit is $4,000 if you’re under age 50 and $5,000 if you’re 50 or older.



David Compton is a Certified Public Accountant with offices in Meridian and Birmingham, Ala.

        

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