Tax Tips: Potential break for retirees


All the stock market turmoil has created an interesting situation for many retirees in America. Those age 70½ or older must withdraw certain minimum amounts from their retirement accounts each year under the Internal Revenue Service rules. (The purpose behind forcing those withdrawals is the fact that they become taxable when taken out, so the IRS gets a cut.)

Many retirees have seen their retirement account values drop in recent months, and would rather not take a distribution this year if they don't have to. Assets like stocks, bonds, and mutual funds would have to be sold to make the distributions, and since the value of those investments are down, selling them locks in a loss for the seniors.

Lobbyists are encouraging Congress to pass legislation that would temporarily halt the minimum distribution requirements. By not forcing withdrawals this year, the IRS would allow retirees to hold their investments, waiting for them to regain at least some of their value over the next year. Retirees must play a bit of a waiting game, however, as lawmakers have not made a decision on this issue.

Those who haven't taken a minimum distribution this year would do well to hold off. Wait until closer to the end of the year to see if there will be a temporary change to the rules that may benefit you.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.