<p>Greetings from the IRS</p>
<p><a href=“Retirement Plan and IRA Required Minimum Distributions FAQs | Internal Revenue Service”>http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Required-Minimum-Distributions</a></p>
<p>Goodness for a few minutes I thought the IRS was stalking parents on CC or this thread. LOL!</p>
<p>Just thought I would remind folks about their new retirement partner at age 70 1/2…the IRS will not forget about you…ever!</p>
<p>How does the IRS know if you’ve taken the required minimum distribution? Do you report your entire balance on your tax forms somewhere? Are custodians required to report the balance to the IRS? </p>
<p>If you have multiple IRAs you don’t have to take a distribution from each of them, you can take the entire amount from just one if you want. So I am curious how the IRS knows.</p>
<p>Yes, the custodian reports the annual distribution–big penalty for failing to take RMDs. H has been taking them regularly since he turned 70.5. </p>
<p>I’m sure the tax form must have asked.</p>
<p>Yes the custodian reports the distribution. But without knowing the balance, just knowing the distribution amount doesn’t tell you if it met the minimum. Especially if you have multiple accounts.</p>
<p>The custodians of each account reports balance and RMDs every year–at least ours have. Never had problems with our CPA or IRS. </p>
<p>On December 31st. of every year, you add-up the total of all your retirement accounts. Then you look on the RMD Chart for your age that will determine the amount for your RMD. If your spouse is 10 years younger, there is a different chart. The brilliant idea for this exercise is to expose more and more of your retirement accounts to taxes…and all financial institutes will send you friendly reminders. The RMDs are easily found on the internet…best to look now rather than waiting for the shock. </p>
<p>IF you have the distributions made directly to 501c3 nonprofit, they do NOT increase your income. The 12/31 valuation of the prior year is how they determine what your RMD will be for the following year. It’s not that complicated. If you inherit an IRA that requires distributions, the custodian will walk you through how much needs to be distributed and it’s a similar process.</p>
<p>I believe the 501©(3) option for IRA distributions went away as of 2013, HImom – maybe they’ll reinstate it, but maybe not. </p>
<p>Hmmm, have not heard that donating the RMD to a 501c3 is no longer an option to avoid increased income in 2013–our CPA didn’t mention that when we asked (but since we aren’t doing it, we didn’t pursue it). </p>
<p>You can still have a donor advised fund and donate to your charities that way, getting the immediate tax deduction and not have to declare interest or capital gains. That seems a very popular way for folks with significant capital gains to give.</p>
<p>What’s everyone’s opinion on “gifting” children some money when we are alive? I guess it all depends on their respective ages and if there are needs for the money? e.g. My 25 year old is thinking of getting his own place in a few short years, maybe a condo or townhouse, and we want to help him. We cannot just put down the downpayment for him at that time because the sum may trigger federal gift tax guideline (if over $28k in one year from both parents), so we are thinking to give him the money over the next 2-3 years and put it in his account and let it sit there until he buys the house.</p>
<p>For my 18 year old who is a college freshman, what is the best way to “gift” her some money, to put dollars in mutual funds for her? Other investment vehicles? I am not talking about anywhere near the max of $28k, may be a few thousand. I already helped her with this year’s Roth IRA contribution.</p>
<p>^ Unless your estate will exceed $5+ million (double if you are married and you set it up right) you will not owe gift tax. You might lower your estate tax exemption, and you’ll have to fill out a form, but no taxes will be due if you exceed the $28k limit.</p>
<p>When he supplies for a mortgage the bank week want proof the money had been in his account for a while and is not a secret loan, so keep that in mind and don’t wait until the last minute.</p>
<p>What would the purpose be of a gift to your daughter? </p>
<p>Notrichenough.So any gift over the years will be applied to the $5+ million from the estate, and not be taxed if any given one year I give more than the $28k limit? If we have between $1m to $2m, we will be ecstatic, $5+ million is so far out, but then I can always hope to win a lottery ticket.</p>
<p>How many years on average should I transfers money to my son’s account before the downpayment? But if I am allowed, by IRS rule, to give him $14k a year, will the bank still frown on that or why would they care?</p>
<p>As far as for my daughter, I was just thinking why wait until I am gone, if I start giving her the money and maybe help her invest (I have a lot to learn about investing myself, lol), then she will have money to buy a car when she is done college, or buy a house in 8 or 10 years. She is in a lower tax rate than we are, so during college, her investment income may not be taxed since her annual income will be low even if she gets a summer job. Not sure this makes sense.</p>
<p>Hope, I think you can give a letter for proof. I did that for a relative recently in exceed of a certain amount.
But keep in mind that assets do rise rapidly so you might exceed the $5million times 2.</p>
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<p>Until she turns 24, you have to pay “kiddie” tax. Her earning will be taxed at parents marginal rate if she is not supporting herself, including long term capital gains.</p>
<p>You can buy her a car. I put money into Roth IRA my daughter, one of them, the other one just started working this year. So I don’t worry about any tax, keep it simple for my sake.</p>
<p>DrGoogle, I expect our estate will be between $1m to $2m many years (I hope!) down the road, $5m times 2 is just totally out of the question, I can dream about having that kind of money, plus we are recently retired, working years are over but luckily we both have pensions.</p>
<p>Iglooo, I did not know about the “kiddie tax”, thank you.</p>
<p>I just revisited my trust for maintenance purpose and I was surprised it went up 50% so in 30 years I know it will be way up. There is life insurance proceedings that could throw things out of wack. YMMV.</p>