For that last item, just how would that work? Most people, me included, have already gotten theirs this year. Except for one client who "forgot" and was in today for me to figure his so he could hurry and call them to send him a check post haste.
There is some saying about too many cooks spoiling the broth, and we've got a tad over 500 Congresscritters cooking up tax law. They are politicians, so it'll work the most confusing way possible.
The reality to suspend RMD for 2008 is doable, just pass a law on December
31st at 11:59:50 pm. UN_doing the RMD's that have been previously made isn't going to happen. But for those who haven't taken it yet.....
For those who have not yet taken the 2008 RMD, administratively waive the penalty using existing statutory authority.
For those who already took it, there's some wiggle room in the Code which could be used to justify extending the 30 day rollover period. This would result in the effect of no RMD having been taken, which puts us back to waiving the penalty.
The rollover option is dodgy legally, but who would challenge it?
But it seems to me that it ain't gonna happen since I'm sure there are people at Treasury who could find the same options I did. They just decided not to do it.
There was a discussion on this two weeks ago (forced IRA/401K withdrawals at age 70 to be suspended).
The Treasury Secretary does have the authority to alter the RMD rule for 2008. Announcing today (the 30th of Dec.) that you don't have to take it in 2008, is of very little to no value to anyone as I have to assume that a very large majority have already taken
100% of the RMD.
How do you handle those taxpayers who have already taken their RMDs? For certain types of accounts (self-directed IRAs for example), it is probably a ho-hummer as these types of accounts are equipped to accept contributions. For any employer type plan, it is both a practical and administrative nightmare as they are not equipped to take direct contributions from retirees. And keep in mind that there are taxpayers who are not age 70 1/2 that also have an RMD requirement. Think inherited.
The problem has two components. The amount of the distribution for those whose investments were heavy in securities represents a large portion of their 2008 year-end balance and one has to pay tax on the distribution.
Therefore, it seems to me that there are only two options to ameliorate the situation. Electing to forgo taxing the 2008 RMDs would help and I don't see any significant issues implementing this. Elect to treat 2008 as business as usual and implement a
2009 plan by allowing one to redeposit the 2008 RMD into a self-directed IRA account with a tax deduction for the contribution. This would help restore the retirement plan balance and by providing a tax deduction for the contribution you eliminate double taxation.
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