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A reprieve for mandatory plan distributions

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in Small Business Tax

Q. Because I will turn age 70 1/2 on Aug. 24, 2007, I’ve been told that I must begin taking funds from my retirement plans in 2007. In a recent issue, you stated that distributions must begin in the year after the year you reach age 70 1/2 (see 08/07/06 issue). Is that right? T.W., Green Bay, Wis.

A. Yes. Technically, you don’t have to begin minimum distributions from qualified retirement plans or IRAs until April 1 of the year following the year that you turn age 701/2. Thus, you can postpone distributions until April 1, 2008. But be aware that you must also take required minimum distributions (RMDs) in 2008 for the 2008 tax year. To avoid doubling up on RMDs in 2008, you might decide to start withdrawals in 2007, anyway. Tip: Employees who are not 5 percent-or-more owners can postpone distributions from a qualified plan until they retire.

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