Who is Not Required to Take a 2019 RMD by December 31?

While most solo 401k owners who are 70 ½ or older will need to take a 2019 required minimum distribution (RMD) by December 31, 2019. However, that deadline does not apply to all solo 401k owners. Solo 401k owners who are age 70 ½ or over are not required to be take an RMD from their solo 401k by the upcoming December 31 deadline if you just reached 70 1/2 in 2019. Generally, when you reached age 70 ½ you must take an RMD. However, for the first year you catch a break. You do not have to take your 2019 RMD until your Required Beginning Date (RBD) which is April 1, 2020. This is only a one-time exception. All future Solo 401k RMDs must be taken by December 31. However, there is a downside to waiting until 2020 to take your 2019 RMD. You will need to take your RMD for 2019 by April 1 and the 2020 RMD for your second distribution calendar year by December 31. That means two taxable distributions, which would need to be included in income so you won’t be able to spread your tax liability over 2019 and 2020 if you took your 2019 RMD in 2020.

With respect to reporting the solo 401k RMD on your Form 1040 tax return,, if you take the 2019 RMD this calendar year, reporting is due when you file your 2019 personal tax return, which will be April 15, 2020.  If you wait to take your 2019 RMD in 2020, then both RMDs (2019 & 2020) will be due on your 2020 personal tax return, which would would be filed by April 15, 2021.

Lastly, don’t get confused with the IRA RMD aggregation rules which allow the IRA owner to aggregate all her IRA balances and take the RMD one IRA. This same rule does not apply to qualified plans such as a solo 401k plan. The RMD due from the solo 401k must be withdrawn from the solo 401k plan, not from your IRA  or from your current employer 401k plan if you also have a full-time job and participate in that employer’s 401k plan.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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