The 2017 April 1 Tax Deadline Hitting Oldest Baby Boomers

Tax day is Tuesday, April 18 this year — giving procrastinators a little leeway from the traditional April 15 deadline. That’s when you file your federal and state income tax returns for the 2016 tax year. But there’s another April tax deadline for lots of older retirement account holders. If you turned 70 ½ last year and you’ve got an Individual Retirement Account or a 401(k), you have to take out certain required minimum distributions by Saturday, April 1.

“April 1st is April 1st; it’s like when people ask, “When is fourth of July? July 4th!” says Ed Slott, a CPA and IRA expert in Rockville Centre, N.Y. “You’ve got to get it done on time.”

The oldest boomers need to pay attention. If you turned 70½ in 2016 (birthdates after June 30, 1945 and before July 1, 1946) and didn’t take your first distribution for tax year 2016 last year, you have to take it by April 1, 2017. (The April 1 deadline only applies to the required distribution for the first year). You’ll need to take your second distribution (for tax year 2017) by Dec. 31, 2017. For all subsequent years, the required distribution must be made by Dec. 31.

What’s tricky this year is that April 1 falls on a Saturday. If you’re taking distributions in cash — you can wait until the last minute by going online and transferring the money from the IRA to a taxable account or checking account you have linked to your IRA. Fidelity Investment issued a warning to its clients: if you have to sell an investment position to fulfill your distribution, you need to do that before market close today (Friday, March 31) at 4 p.m.

Another option: transferring shares “in kind.” If you transfer shares of a mutual fund or stock, you still pay tax on the distribution, just like you do if you take out cash. The stock gets a new cost basis bumped up to the fair market value on the date of distribution (be sure to keep a record of this because it saves you taxes later on).

The April 1 deadline applies to traditional IRAs, SEP-IRAs and SIMPLE IRAs, but not Roth IRAs. It also generally applies to 401(k), 403(b) and 457(b) workplace plans. The caveat: If you’re still working, your employer might let you delay RMDs from a workplace 401(k) until April 1st of the year after you retire.

If you fail to take out required distributions on time, the Internal Revenue Service can impose a 50% penalty on any amounts not withdrawn. (Ashlea Ebeling)