Page 87 - 2020 Publication 17

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amount of the contribution and any net in- tions under What Acts Result in Penalties or Are Distributions Taxable?
come (or loss) allocable to the contribution Additional Taxes in Pub. 590-B.
to the trustee of the second IRA. In general, distributions from a traditional IRA
• The name of the trustee of the first IRA and When Must You Withdraw are taxable in the year you receive them.
the name of the trustee of the second IRA. IRA Assets? (Required Exceptions. Exceptions to distributions from
• Any additional information needed to make Minimum Distributions) traditional IRAs being taxable in the year you re-
the transfer. ceive them are:
Reporting a recharacterization. If you elect You can't keep funds in a traditional IRA indefi- • Rollovers;
to recharacterize a contribution to one IRA as a nitely. Eventually, they must be distributed. If • Qualified charitable distributions (QCDs),
contribution to another IRA, you must report the there are no distributions, or if the distributions discussed later;
recharacterization on your tax return as directed aren't large enough, you may have to pay a
by Form 8606 and its instructions. You must 50% excise tax on the amount not distributed as • Tax-free withdrawals of contributions, dis-
treat the contribution as having been made to required. See Excess Accumulations (Insuffi- cussed earlier; and
the second IRA. cient Distributions), later. The requirements for • The return of nondeductible contributions,
distributing IRA funds differ depending on discussed later under Distributions Fully or
When Can You Withdraw whether you are the IRA owner or the benefi- Partly Taxable.
ciary of a decedent's IRA.
or Use IRA Assets? Required minimum distribution. The amount Although a conversion of a traditional
that must be distributed each year is referred to ! IRA is considered a rollover for Roth
IRA purposes, it isn't an exception to
There are rules limiting use of your IRA assets as the required minimum distribution. CAUTION
and distributions from it. Violation of the rules the rule that distributions from a traditional IRA
generally results in additional taxes in the year Distributions not eligible for rollover. are taxable in the year you receive them. Con-
of violation. See What Acts Result in Penalties Amounts that must be distributed (required min- version distributions are includible in your gross
or Additional Taxes, later. imum distributions) during a particular year income subject to this rule and the special rules
for conversions explained in Converting From
Contributions returned before the due date aren't eligible for rollover treatment. Any Traditional IRA Into a Roth IRA under Can
of return. If you made IRA contributions in IRA owners. If you are the owner of a tradi- You Move Retirement Plan Assets? in chapter 1
2020, you can withdraw them tax free by the tional IRA, you must generally start receiving of Pub. 590-A.
due date of your return. If you have an exten- distributions from your IRA by April 1 of the year
sion of time to file your return, you can withdraw following the year in which you reach age 72. Qualified charitable distributions (QCDs). A
them tax free by the extended due date. You April 1 of the year following the year in which QCD is generally a nontaxable distribution
can do this if, for each contribution you with- you reach age 72 is referred to as the “required made directly by the trustee of your IRA to an
draw, both of the following conditions apply. beginning date.” organization eligible to receive tax deductible
• You didn't take a deduction for the contri- Distributions by the required beginning contributions. See Qualified Charitable Distribu-
bution. date. You must receive at least a minimum tions in Pub. 590-B for more information.
• You withdraw any interest or other income amount for each year starting with the year you A QCD will count towards your mini-
reach age 72. If you don't (or didn't) receive that
earned on the contribution. You can take TIP mum required distribution. See Quali-
into account any loss on the contribution minimum amount in the year you become age fied charitable distributions under Are
72, then you must receive distributions for the
while it was in the IRA when figuring the Distributions Taxable? in chapter 1 of Pub.
amount that must be withdrawn. If there year you become age 72 by April 1 of the next 590-B for more information.
year.
was a loss, the net income earned on the
contribution may be a negative amount. If an IRA owner dies after reaching age 72, Ordinary income. Distributions from tradi-
but before April 1 of the next year, no minimum tional IRAs that you include in income are taxed
Note. To figure the amount you must with- distribution is required because death occurred as ordinary income.
draw, see Worksheet 1-4 under When Can You before the required beginning date. No special treatment. In figuring your tax, you
Withdraw or Use Assets? in chapter 1 of Pub. Even if you begin receiving distribu- can't use the 10-year tax option or capital gain
590-A. ! tions before you attain age 72, you treatment that applies to lump-sum distributions
CAUTION must begin figuring and receiving re- from qualified retirement plans.
Earnings includible in income. You must quired minimum distributions by your required
include in income any earnings on the contribu- beginning date.
tions you withdraw. Include the earnings in in- Distributions Fully or Partly
come for the year in which you made the contri- Distributions after the required beginning Taxable
butions, not in the year in which you withdraw date. The required minimum distribution for Distributions from your traditional IRA may be
them. any year after the year you turn age 72 must be fully or partly taxable, depending on whether
Generally, except for any part of a with- made by December 31 of that later year. your IRA includes any nondeductible contribu-
! drawal that is a return of nondeductible tions.
CAUTION contributions (basis), any withdrawal of Beneficiaries. If you are the beneficiary of a Fully taxable. If only deductible contributions
your contributions after the due date (or exten- decedent's traditional IRA, the requirements for were made to your traditional IRA (or IRAs, if
ded due date) of your return will be treated as a distributions from that IRA generally depend on you have more than one), you have no basis in
taxable distribution. Excess contributions can whether the IRA owner died before or after the your IRA. Because you have no basis in your
also be recovered tax free as discussed under required beginning date for distributions. IRA, any distributions are fully taxable when re-
What Acts Result in Penalties or Additional ceived. See Reporting taxable distributions on
Taxes, later. More information. For more information, in-
cluding how to figure your minimum required your return, later.
Early distributions tax. The 10% additional distribution each year and how to figure your re- Partly taxable. If you made nondeductible
tax on distributions made before you reach age quired distribution if you are a beneficiary of a contributions or rolled over any after-tax
59 1 /2 doesn't apply to these tax-free withdraw- decedent's IRA, see When Must You Withdraw amounts to any of your traditional IRAs, you
als of your contributions. However, the distribu- Assets? (Required Minimum Distributions) in have a cost basis (investment in the contract)
tion of interest or other income must be repor- chapter 1 of Pub. 590-B. equal to the amount of those contributions.
ted on Form 5329 and, unless the distribution These nondeductible contributions aren't taxed
qualifies as an exception to the age 59 1 /2 rule, it when they are distributed to you. They are a re-
will be subject to this tax. See Early Distribu- turn of your investment in your IRA.
Chapter 9 Individual Retirement Arrangements (IRAs) Page 83