Taxpayers 70 ½ and up must take their payouts from IRAs and company plans by year-end. Start with your December 31, 2010 IRA balances and divide each of them by a factor for your age (The age factors are printed in IRS Publication 590 which you can find at www.IRS.gov). You can use a higher factor if you are more than ten years older than your spouse. The sum of these amounts can be taken from any IRA you choose. The process is similar for retirement plan payouts, but you must take the required amount from each plan.
Failing to do so can result in a 50 percent penalty on the amount that should have been distributed. The IRS can waive the penalty if the individual can establish that the shortfall was due to reasonable error and steps are being taken to remedy the failure to distribute.
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