IRA-required minimum distributions after age 70 1/2 are calculated by dividing the balance in the account as of Dec. 31 of the previous year by the account holder's life expectancy according to the appropriate IRS table, reports the Internal Revenue Service. An individual's precise distribution amounts must be recalculated each year, states Kay Bell for Bankrate.
Although the administrator of the IRA may calculate the required minimum distribution, the account holder is responsible for its accuracy, explains the IRS. Failure to initiate distributions by April 1 of the year after turning 70 1/2 results in a penalty tax of 50 percent of the amount of the calculated minimum distribution. To determine life expectancy, the IRS uniform lifetime table is used by those who have multiple beneficiaries or spouses less than 10 years younger than them. The joint and last survivor table is used by those whose spouse is more than 10 years younger and is the sole beneficiary. The single life expectancy table is used by beneficiaries after the account holder's death.
Although owners of multiple accounts must calculate required minimum distribution amounts separately for each plan, they can make the withdrawal from whichever plan or plans they choose, states the IRS. IRA account holders can avoid the possible higher tax bills of two distributions in the same year by taking the first distribution in the same year they turn 70 1/2 instead of April 1 of the following year, reports Emily Brandon for U.S. News & World Report Money.