Tax News

CCH (cch.taxgroup.com) reports:

  Sixty-one members of Congress are displeased with the Treasury Department's recent decision not to provide relief from required minimum distributions from IRAs and similar arrangements for 2008 (TAXDAY, 2008/12/22, T.1). The bipartisan group of lawmakers asked President Bush to use his executive authority to suspend RMDs for 2008 and, moreover, to allow individuals to recontribute RMDs already taken for 2008.

Lower Account Balances

  Generally, RMDs are calculated by dividing the prior December 31 balance of the IRA or retirement plan account by a life expectancy factor provided by the IRS. RMDs for 2008 are based on account balances as of December 31, 2007, which were typically higher than today's account balances because of the steep decline in the stock market during 2008. Some individuals have near-worthless investments, Cindy Hockenberry, EA, tax analyst, National Association of Tax Professionals (NATP), told CCH.

  Several bills were introduced in Congress in recent weeks to suspend RMDs for 2008 and beyond. One proposal would have suspended RMDS for 2008, 2009 and 2010. Ultimately, Congress voted to suspend RMDs only for 2009 as part of the Worker, Retiree and Employer Recovery Act of 2008 (P.L. 110-458), which President Bush signed into law on December 23.

No Relief for 2008

  On December 17, a senior Treasury official revealed that the government would not suspend RMDs for 2008. "Because Congress has provided broad and direct relief [for 2009]...the Treasury and the IRS have determined that any further change to the RMD rules should not be undertaken," Kevin I. Fromer, Treasury assistant secretary for legislative affairs, told House Education and Labor Committee Chairman George Miller, D-Calif.

Executive Action

  "We respectfully request that you use your executive authority to direct the Secretary of the Treasury to use the flexibility provided by statute to immediately waive the (RMD) rules for the 2008 tax year," the lawmakers wrote to President Bush on December 19. According to the lawmakers, the Treasury Department and the IRS could act without legislation.

  "Furthermore, we ask that you use the same authority to allow retirees who have already withdrawn in 2008 to make recontributions to their accounts," the lawmakers wrote. Recontribution would help individuals who have already taken 2008 RMDs.

  By George L. Yaksick, Jr., CCH News Staff

Lawmakers' RMD Letter to President Bush