How do I get an IRA distribution from my bank?

Judy O'ConnorDear Tax Talk,
I'm going nuts trying to find out how to get the necessary deduction made from an IRA. One bank does it automatically at the end of the year, but the other one doesn't -- I have 2. There is more information than I could ever use all over the Web about when to start, how to figure out how much to deduct, etc. Just nothing about how to go about getting it done (no forms or where to get them). How do I take my IRA distribution?

Thanks for your consideration.
-- Barbara

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Dear Barbara,
You are correct: There is so much information out there on Individual Retirement Accounts, or IRAs, and this is really a very basic question but a crucial one for anyone who is new to the process of taking an IRA distribution.

The answer is that you need to contact your IRA "trustee," which in your case is the bank where you have your IRA account. The bank will have the form you need. However, you will need to tell the bank how much in tax you want withheld on your IRA distribution.

As far as calculating the amount of tax to withhold, you have not mentioned anything about your age or other income received, so I can only give you some general information to help you stay on track with the IRS.

Generally, traditional IRAs allow you to make tax deductible contributions to your account, where the money grows tax-free until you take a distribution. This is a great incentive for retirement planning, as it couples the tax deferral on the contribution along with the tax-free growth of the account. You are allowed to take money out of your traditional IRA whenever you want. However, the IRS wants you to keep the money in the account until you are at least 59 1/2 or you could be subject to an additional 10% tax on the withdrawal unless you meet certain exceptions.

The IRS is very patient, but there is a time when you have to pay the piper, or in this case Uncle Sam. Generally, you have to take out a "required minimum distribution," or RMD, by April 1st of the year following the year in which you reach age 70 1/2. This is known as the required beginning date.

What happens if you don't take an IRA distribution?

If the distribution is not made or not calculated correctly, you may have to pay a 50% excise tax on the amount not distributed as required.

The RMD is calculated by taking your year-end balance of the previous year and dividing it by the applicable distribution period or your life expectancy as shown in the IRS tables in IRS Publication 590-B, Distributions from Individual Retirement Arrangements.

Thanks for the great question and all the best to you.

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