The Edmond Sun

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October 23, 2009

Returning retirement fund distributions may save 2009 tax dollars

KATHY TOPPINS

EDMOND — Individual retirement account owners and retirement plan participants who already have taken a required minimum distribution in 2009 have the opportunity to return the money to a tax-deferred retirement account by Nov. 30 and reduce their taxable income for 2009.

The Worker, Retiree and Employer Recovery Act of 2008, signed into law in December, waived the 2009 required minimum distribution from individual retirement accounts, 401(k)s and other retirement plans, said Greg Womack, certified financial planner with Womack Investment Advisers of Edmond. Some retirees took the scheduled distribution while unaware of the waiver.

The Internal Revenue Service recently issued a new guidance that those who already have received a required minimum distribution in 2009 now have the option to roll it back into the same account or into another tax-deferred retirement account by Nov. 30, or 60 days after the distribution was received, whichever is later.

In December 2008, a lot of retirement funds were down substantially, said Dick Kostboth, CPA and tax director with John Arledge and Associates P.C. of Edmond. The theory behind the government’s action, Kostboth said, was the waiver would allow retirees to avoid locking in losses and give the retirement funds time to regain some of their value. The market has done fairly well since the first of the year, he said.

“Because it’s a scheduled distribution, some people took the distribution even though they may not have needed the income,” Womack said. If they don’t need the income and the money is still available, they may want to put the money back into a retirement account by Nov. 30 and reduce taxable income for 2009, he explained.

“Assuming what you took out was the result of deductible contributions, everything you took out was taxable,” Kostboth said.

While there’s an immediate advantage to returning the money, he said, there may not be a long-term advantage. One unknown is future-year tax rates.

“It’s somewhat of a guessing game,” Kostboth said. “You have to look at each individual situation.”

The one rollover per year rule remains in effect for any distribution made within the 60-day rollover window, Womack said. Also, any 2008 required minimum distributions that could have been taken through April 1, 2009, were not waived and are not included in this new guidance.



ktoppins@edmondsun.com | 341-2121, ext. 112

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