How to Get in Trouble With the IRS

“It’s crucial to be sure you have all your essential tax paperwork, since it’s easy to miss something,” says Barbara Camaglia, a CFP and CPA in Beachwood, Ohio. That includes forms such as W-2s from your employer, if you’re still working; your SSA-1099, if you receive Social Security benefits; and other 1099s reporting interest or dividends, proceeds from sales or retirement account distributions.

You should have received all these forms by now; the deadline for employers to send wage or income forms was Jan. 31; financial organizations had until Feb. 15 to send their 1099s. So double-check any mail that has piled up; you may also have to log in to your bank account to get a 1099-INT interest statement. 

Let an RMD slide

Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your traditional IRAs or pretax 401(k) account each year, once you reach a certain age. If you were born in 1950 or earlier but you failed to take your RMD during 2023, act fast: Contact your plan custodian and take the RMD for the prior year, file Form 5329 with the IRS and include a letter explaining why you didn’t take the RMD by the Dec. 31 deadline. By fixing your mistake before the IRS catches it, you should avoid a 25 percent penalty tax on the amount you should have withdrawn, though you may have to pay a 10 percent penalty instead.

Whatever your age, it’s not too early to strategize your RMDs for 2024 and beyond. If you’re turning 73 this year, 2024 is the first year for which you’ll have to take an RMD. You have until April 1, 2025, to take your first year’s RMD. But taking your 2024 and 2025 RMDs in the same calendar year might mean higher taxes or Medicare premiums, so you might be better off taking that first RMD this year.

Will it be a few years before you turn 73? Consider making withdrawals — also known as distributions — even though they’re not required. Taking distributions now will reduce the size of your RMDs once you have to take them. And that might prevent your RMDs from bumping up your tax bracket, raising your Medicare premiums and increasing the taxes on your Social Security benefits, says Kristine McKinley, a certified financial planner and CPA in Kansas City, Missouri.

If you’re age 70½ or older, an additional tactic for reducing your RMDs — and your tax bill — is to make a qualified charitable distribution (QCD) directly from your IRA account to a designated charity. For those 73 or older, the QCD will count toward your RMD. Though you won’t be able to claim a deduction for the donation, you won’t be taxed on the distribution.