Making a deductible Traditional IRA contribution in one year and then converting it to a Roth IRA in the next year has the effect of moving the income from the first year to the second year. For example, a taxpayer made a Roth contribution in 2016 and then later it is determined his income in 2017 iwill be in a substantially
The penalty, called the excess accumulation penalty, for failing to take the required minimum distribution from IRAs and qualified plans is 50% of the amount that should have been withdrawn but wasn’t. Not all trustees (financial institutions) remind their clients to take the distribution, and it is quite easy for elderly individuals to overlook or not understand the distribution rules, resulting in a potentially severe penalty. However, the IRS does have a liberal policy for having the penalty waived.