Time running out to fix this IRA error and avoid a 50 percent penalty

Advisors


Tax season is prime time for catching and fixing last year’s individual retirement account slip-ups.

Whether you put away too much money in your IRA or you forgot to take out a required minimum distribution — ie, a mandatory withdrawal — after you turned 70½, your accountant is likely to discover your mistakes.

“Missed RMDs are often caught now, while you’re working with your tax preparer,” said Tim Steffen, CPA and director of advanced planning at Robert W. Baird & Co.

More from Smart Tax Planning:
What taxpayers should know about the new Form 1040
Use your tax return to unearth your spouse’s money secrets
Why the average tax refund is down 16 percent

“They’ll say, ‘You had an RMD last year, why not this year?’ and that’s when you realize you forgot,” he said.

While IRAs are a valuable source of retirement income, the IRS can slap savers with penalties if they mess up the rules of how they work.

The good news is that you can get right with the taxman this spring. Here are a few common IRA mistakes and how you can fix them.



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