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RMD Rule For My SEP IRA?

rhinefire

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I recently closed out my Merrill Lynch SEP IRA this year 2019. I put the money in a CD from an outside bank. I told ML not to take any taxes out of the 100% redemption. Am I still obligated to pay an RMD distribution along with the regular income tax this year?
 

ludin

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I recently closed out my Merrill Lynch SEP IRA this year 2019. I put the money in a CD from an outside bank. I told ML not to take any taxes out of the 100% redemption. Am I still obligated to pay an RMD distribution along with the regular income tax this year?

wow umm it will depend on the type of CD that you put it in or that it was transferred to.
I hope that they talked that out with you and made sure to do it.

there are IRA CD's that will keep your IRA status.

the basic rule of thumb is this if you are transferring from one qualified IRA account to another qualified IRA account it be a distribution but it has a separate category so you will not get penalized.

If you put it into a regular CD then you would pay a 10% penalty upfront on the amount and you will receive a 1099 at the end of the year for the entire amount.
this will count as income.

you have 60 days from the time you pull the money to put it into another qualified IRA account according to the rules i looked up.

for example. if you pulled it out in 2019. it will come do on your 2020 taxes.


If you have 100k in your IRA and you pull it out and put it into a non-qualified CD. You will pay a 10% penalty upfront.
you will then receive a 1099 at the end of the year for 100k.

I highly suggest going to see a financial expert on this situation otherwise you could end up with a huge tax liability at the end of the year.
 

Lutherf

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The 100% disposition will count as your RMD.
 

Lutherf

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wow umm it will depend on the type of CD that you put it in or that it was transferred to.
I hope that they talked that out with you and made sure to do it.

there are IRA CD's that will keep your IRA status.

the basic rule of thumb is this if you are transferring from one qualified IRA account to another qualified IRA account it be a distribution but it has a separate category so you will not get penalized.

If you put it into a regular CD then you would pay a 10% penalty upfront on the amount and you will receive a 1099 at the end of the year for the entire amount.
this will count as income.

you have 60 days from the time you pull the money to put it into another qualified IRA account according to the rules i looked up.

for example. if you pulled it out in 2019. it will come do on your 2020 taxes.


If you have 100k in your IRA and you pull it out and put it into a non-qualified CD. You will pay a 10% penalty upfront.
you will then receive a 1099 at the end of the year for 100k.

I highly suggest going to see a financial expert on this situation otherwise you could end up with a huge tax liability at the end of the year.

I took his comment to mean he closed the IRA. If that's the case then he's done and everything he took out is taxable (no 10% penalty because, if he's taking an RMD, he's well past 59.5y/o).

If, as you seem to think, he did a rollover or T/T transfer to an IRA CD then he will need to take an RMD...and probably pay an early withdrawal penalty for pulling money out of the CD before maturity.
 

ludin

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I took his comment to mean he closed the IRA. If that's the case then he's done and everything he took out is taxable (no 10% penalty because, if he's taking an RMD, he's well past 59.5y/o).

If, as you seem to think, he did a rollover or T/T transfer to an IRA CD then he will need to take an RMD...and probably pay an early withdrawal penalty for pulling money out of the CD before maturity.

RMD don't take affect until you are 70 1/2 according to the IRS.
i don't think we have all the information here.
 

Lutherf

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RMD don't take affect until you are 70 1/2 according to the IRS.
i don't think we have all the information here.

The way I'm reading this is that the OP is at least 70.5 and has taken RMDs before. He has a SEP and has closed it. He then took the proceeds and put them into a CD.

That would be a fairly common thing for someone to do after they retire and can no longer contribute to the SEP. It's usually not a great idea, taxwise, if there's a bunch of money in the SEP but if there's only $20k or something then no big deal.
 

ludin

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The way I'm reading this is that the OP is at least 70.5 and has taken RMDs before. He has a SEP and has closed it. He then took the proceeds and put them into a CD.

That would be a fairly common thing for someone to do after they retire and can no longer contribute to the SEP. It's usually not a great idea, taxwise, if there's a bunch of money in the SEP but if there's only $20k or something then no big deal.

I agree. he should have had some of the taxes taken out now. it would have been probably cheaper on him at the end of the year.
if that is what he did then he will not have a penalty but it will be considered income.
 
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