Required Minimum Distributions:
Required minimum distribution (RMDs) were waived for the tax year 2020 only, so don’t forget to take your RMD for 2021 by Dec. 31, 2021!
If you turn 70 1⁄2 after 2019, you must begin taking RMDs from your traditional IRA by April 1st of the year following the year you reach age 72. For example, if you turned 72 in September 2021, you can either take your 2021 RMD in 2021 or you can wait until April 1, 2022. However, you must take your 2022 RMD by Dec. 31, 2022, which means you’ll have two RMDs to report on your 2022 return if you wait.
If you fail to take your RMD, you’re subject to a 50% excise tax on the amount not distributed. Don’t panic though! You can ask the IRS to waive the tax due to reasonable error if you take steps to remedy the shortfall. Contact our office and we’ll explain what needs to be done and prepare the necessary paperwork.
Ordinarily, if you choose to claim the standard deduction, you cannot deduct your charitable contributions. Good news though, if you don’t itemize deductions for 2021, you may deduct up to $300 ($600 if MFJ) on your 2021 tax return for cash contributions made to most charitable organizations.
If it’s better for you to itemize deductions, you can elect to apply a 100%-of-AGI deduction limit for cash contributions made to most charitable organizations during 2021. Without this election, the usual percentage limit applies (normally 60%), and the nondeductible amount carries over up to five years. We can discuss which AGI limit is best for you based on your specific facts and circumstances.
*Remember to obtain an acknowledgment letter from the charity before filing your return and retain a canceled check or credit card receipt for contributions of cash!!