Here’s a unique way for you to take money out of your retirement account without incurring an IRA withdrawal penalty.
If you had a required minimum distribution but forgot to take it, you’re looking at some pretty hefty penalties. That’s right, the IRS will smack you with a 50% penalty if you missed the deadline. That’s why I wanted to get this message out to you and everyone else who missed the deadline as soon as possible.
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, H.R. 4853, containing the Tax Extenders Compromise, was signed into law on December 17, 2010, by President Barack Obama. Under the provisions of the act:
Taxpayers age 70-1/2 years or older will have a two-year extension (for tax years 2010 and 2011) allowing them to donate up to $100,000 per year tax-free from their Traditional or Roth IRAs to qualifying charitable organization(s).
In addition, qualified charitable donations for tax year 2010 are extended for a one-month period. This means that investors have until January 31, 2011, to make a distribution to a qualifying charitable organization(s) for inclusion on their 2010 tax return.
Do you see the opportunity?
You can contribute to a charity directly from your IRA, pay no tax on the contribution and no penalty if you do so before January 31. That’s right…if you make contributions to a charity before January 31, 2011, you won’t have to worry about nasty IRS penalties even if you missed the deadline. You have to select your IRA custodian carefully because some don’t even know about this rule.
Not bad eh…? What other last-minute tips and tricks do you have to help others reduce tax penalties? Do you see why understanding taxes can really help make the most out of your investments?
P.S. If you liked this post, you might also enjoy “Capital Gains Tax Relief.”