Required withdrawals, also known as required minimum distributions, from traditional IRA accounts are taxed at standard income tax rates, reports the IRS. If account holders do not take required minimum distributions on time, there is a 50 percent penalty tax on the amount that should have been withdrawn.Continue Reading
IRA account holders must initiate required minimum distributions by April 1 of the year after they turn 70 1/2, according to the IRS. After the first withdrawal, they must take distributions yearly by Dec. 31. Although plan administrators can help with calculations, responsibility to withdraw the correct amount yearly lies with the account holder. The exact amount of the distribution changes every year, states Bankrate. The account holder can withdraw more than the minimum, but the excess withdrawal does not count towards the following year's required minimum distribution, reports the IRS.
Distributions are calculated by dividing the account balance as of Dec. 31 of the previous year by the life expectancy of the account holder, as reported by the IRS. Life expectancy is determined using the appropriate IRS life expectancy table. Account holders whose spouses are not more than 10 years younger or whose spouse is not the sole beneficiary use the uniform lifetime table. Those whose only beneficiary is a spouse more than 10 years younger use the joint and last survivor table. Account beneficiaries use the single life expectancy table.Learn more about Taxes